Colombia Monetary Policy

Colombia

Colombia: Central Bank increases key policy rate further

June 3, 2014

The Central Bank (BanRep) increased its reference interest rate by 0.25 percentage points to 3.75% at its 30 May monetary policy meeting. The decision was in line with market analysts’ expectations and represented the second consecutive rate hike. April’s surprising decision to raise the reference rate was the first change from the 3.25% where the Central Bank had kept the rate since March 2013.

The Bank stated that a further interest rate increase is consistent with the current macroeconomic stability and the convergence of inflation to the Bank’s 3.0% target. The Bank pointed out that it expects good economic perspectives for the local and international economy. Particularly, it noted that it foresees solid growth in domestic demand and that the economy is approaching full use of its productive capacity this year. Furthermore, the Bank stated that it expects Colombia’s trading partners to grow at a similar pace as last year on average and that the country will realize high terms of trade. The Bank also stated that it expects that international monetary policy will remain accommodative: it foresees a slow liquidity adjustment in the U.S. and an expansionary monetary policy stance in other developed economies for an extended period of time. In terms of price developments, the Bank said that annual inflation rose, moving closer to the its target. The next policy meeting is scheduled for 20 June.

LatinFocus Consensus Forecast panelists see the policy rate at 4.25% at the end of 2014. Panelists expect the policy rate to end 2015 at 4.83%.


Author: Teresa Kersting, Economist

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Colombia Monetary Policy Chart


Colombia Monetary Policy May 2014

Note: Central Bank policy rate in %.
Source: Colombia Central Bank.


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