Colombia Monetary Policy


Colombia: Central Bank leaves reference rate on hold

January 30, 2015

The Central Bank (BanRep) left its reference interest rate unchanged at 4.50% at its 30 January monetary policy meeting. The decision was in line with market expectations and represented the sixth consecutive meeting at which the rate was kept on hold, following five rate hikes.

In its accompanying statement, BanRep stated that, while domestic demand is expected to have performed solidly in the last quarter of 2014, several external factors constitute downside risks to growth. In the Central Bank’s view, the weakened oil price represents the main risk, as it is likely to negatively affect the trade balance and public accounts. Moreover, BanRep stated that its main trading partners expanded at a slower pace than projected, which is also likely to hold back growth. On the upside, according to the Bank, the depreciation of the Colombian peso against the U.S. dollar, plus the low oil price’s expected positive growth impulse on the global economy, will party compensate for lower growth in Colombia’s oil-sector. Regarding price developments, BanRep noted that inflation closed 2014 slightly above the midpoint of the Bank’s target range and that inflation expectations for the next year are also situated within the upper half of the target range. Against this background, the Bank decided that the current level of the reference interest rate is adequate.

BanRep reiterated that future decisions will depend on the information available. The next policy meeting is scheduled for 20 February.

LatinFocus Consensus Forecast panelists see the policy rate ending 2015 at 4.45% and they expect it to end 2016 at 4.63%.

Author: Teresa Kersting, Economist

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Colombia Monetary Policy Chart

Colombia Monetary Policy January 2015

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

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