Colombia: Central Bank stays put in October
October 31, 2019
Colombia’s Central Bank (BanRep) held the benchmark interest rate unchanged at 4.25% at its latest Board of Directors meeting on 31 October. The decision, which was unanimous and in line with market expectations, means that the rate has remained at the same level since 27 April 2018—when it was cut by 25 basis points.
The Bank held rates in light of within-target inflation and solid growth expectations for the second half of the year. Although policymakers expected price pressures to recede somewhat in September, inflation held steady at August’s 3.8% amid persistent supply-side constraints. Nevertheless, solid economic activity prospects for H2 supported the decision to stay put in October.
Looking ahead, Governor Juan José Echavarría struck a slightly more hawkish tone in its forward-looking guidance, signaling that the Bank is unlikely to join the global easing cycle anytime soon and that the base case is for the rate to remain “unchanged over the coming months”. Although easing supply constraints are expected to bring price pressures down early next year, the increased volatility of the peso as of late raises upside risks to the inflation outlook.
The next monetary policy meeting will be held on 22 November.
Author: Nicolás J. Aguilar, Economist