Colombia Monetary Policy

Colombia

Colombia: Central Bank keeps interest rate on hold

October 31, 2014

The Central Bank (BanRep) left its reference interest rate unchanged at 4.50% at its 30 October monetary policy meeting. The decision was widely expected by market analysts and represented a second pause in the interest rate tightening cycle following five consecutive rate hikes.

BanRep’s accompanying statement in large part reiterated last month’s message. The Central Bank stressed the economy’s ongoing strong economic performance and that the output gap has almost closed. Furthermore, the Bank noted that inflation expectations remain close to its 3.0% target. Nevertheless, the Bank pointed out the following downside risks to aggregate demand: worsening terms of trade due to the declining international oil price; uncertainty about the global economic recovery owing to the Euro area’s subdued performance; and uncertainty regarding the cost of external financing as risk premiums of several countries have risen and their currencies have depreciated against the U.S. dollar. Taking into account the current balance of risks, the Bank decided that the current level of the reference interest rate is adequate.

BanRep signaled a neutral stance on monetary policy in saying that future decisions are subject to the developments of real and financial indicators. The next policy meeting is scheduled for 28 November.

LatinFocus Consensus Forecast panelists see the policy rate at 4.59% at the end of 2014. Panelists expect the policy rate to end 2015 at 4.90%.


Author: Teresa Kersting, Economist

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Colombia Monetary Policy Chart


Colombia Monetary Policy October 2014

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


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