Colombia Monetary Policy

Colombia

Colombia: Central Bank leaves interest rate on hold

September 26, 2014

The Central Bank (BanRep) left its reference interest rate unchanged at 4.50% at its 26 September monetary policy meeting. The decision was widely expected by market analysts and represented the first pause in the interest rate tightening cycle following five consecutive rate hikes.

In its accompanying statement, BanRep underlined the economy’s ongoing strong economic performance and that productive capacity has almost reached its full potential. Furthermore, the Bank stated that inflation expectations remain around its 3.0% target. However, the Bank pointed out the following potential downside risks to aggregate demand: worsening terms of trade due to falling international oil prices; uncertainty about the global economic recovery owing to the Euro area’s sluggish performance; and uncertainty regarding the cost of external financing as risk premiums of several countries have increased and their currencies have depreciated against the U.S. dollar. In light of the current balance of risks, the Bank determined that the current level of the reference interest rate is adequate.

BanRep signaled a neutral stance on monetary policy in stating that future decisions will depend on the developments and projections of real and financial indicators. The next policy meeting is scheduled for 30 October.

LatinFocus Consensus Forecast panelists see the policy rate at 4.72% at the end of 2014. Panelists expect the policy rate to end 2015 at 5.05%.


Author: Teresa Kersting, Economist

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Colombia Monetary Policy September 2014 0

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


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