Colombia Monetary Policy


Colombia: Central Bank stays put again and affirms inflation target rate

November 28, 2014

The Central Bank (BanRep) left its reference interest rate unchanged at 4.50% at its 28 November monetary policy meeting. The decision was widely expected by market analysts and represented the third consecutive decision to maintain interest rates following five successive rate hikes.

BanRep’s statement in large part echoed last month’s message. The Central Bank pointed out that aggregate demand continued to be strong and that the output gap has almost closed. Moreover, the Bank said that economic growth is expected to remain robust but decelerate a bit in the second half of this year compared to the strong growth rates registered in the first half. According to BanRep, inflation expectations are still close to its 3.0% target. The Bank did, however, point 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; and uncertainty regarding the cost of external financing as risk premiums of several countries continued to rise and their currencies kept depreciating against the U.S. dollar. Given this balance of risks, the Bank decided that the current level of the reference interest rate is adequate.

In addition, BanRep affirmed in the statement that it would maintain its inflation target rate at 3.0% plus/minus 0.1 percentage points for 2015. The Central Bank again signaled a neutral stance on monetary policy in stating that future decisions depend on the available information. The next policy meeting is scheduled for 19 December.

LatinFocus Consensus Forecast panelists see the policy rate at 4.52% at the end of 2014. Panelists expect the policy rate to end 2015 at 4.80%.

Author: Teresa Kersting, Economist

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Colombia Monetary Policy Chart

Colombia Monetary Policy November 2014

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

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