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Colombia Monetary Policy October 2018

Colombia: Central Bank keeps benchmark interest rate on hold at 4.25%

At its 26 October Board of Directors meeting, Colombia’s Central Bank (Banco de la República, BanRep) took the unanimous decision to keep the benchmark interest rate on hold at 4.25%, where it has been since 27 April when the Bank cut the rate by 25 basis points. The latest decision was in line with market expectations.

Slowly-improving economic activity, supported by higher oil prices, and subdued inflationary pressures motivated the Bank to hold the rate stable. Inflation came in at 3.2% in September, marginally up from 3.1% in August and remaining close to the midpoint of the Bank’s 2.0%–4.0% target range. Although inflation crept up, expectations remain well-anchored and indicate that inflation should remain close to the mid-point of the target band by year-end. While overall activity indicates growth is firming, lingering weaknesses in the construction, and the oil and mining sectors, have constrained the pace of recovery.

The Bank’s statement provided little forward guidance beyond reiterating that the trajectory of inflation will be monitored closely in the context of global developments: particularly, the U.S. Federal Reserve’s tightening cycle, the evolution of oil prices, and trade tensions. The next monetary policy meeting will be held on 21 December.

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