Colombia Monetary Policy


Colombia: Central Bank raises interest rate amid rising inflationary pressures

March 7, 2011

In February, consumer prices added 0.60% over the previous month, decelerating from the 0.91% rise observed in January. Higher prices for education (+4.17% month-on-month) and food (+0.66% mom) were the main drivers behind the monthly price rise. As a result, annual headline inflation inched down from 3.4% in January to 3.2% in February. The core inflation index, which excludes more volatile items such as fresh food and fuels, added 0.63% month-on-month in February. That said, annual core inflation remained flat in February at 3.1%. At its latest monetary policy meeting held on 25 February, the Central Bank raised the reference interest rate by 25 basis points to 3.25%. The hawkish move came in after nine consecutive months where rates were left at a historic low of 3.00%. As rising commodity prices exert upward pressure on inflation, the decision to raise interest rates by monetary authorities aims to assuage growing inflation concerns and anchor inflationary expectations in the longer term. Currently, inflation remains within the 1.0 percentage point tolerance margin of the Central Bank's 3.0% target.


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