Colombia: Central Bank surprises market in April by increasing key policy rate
April 25, 2014
The Central Bank (BanRep) increased its reference interest rate by 0.25 percentage points to 3.50% at its 25 April monetary policy meeting. The decision contrasted market analysts' expectations as they had expected the rate to be kept at 3.25% where it had rested since March 2013.
The Bank stated that it increased the reference rate against a background of macroeconomic stability and increasing inflation. The Bank also pointed out that it expects good economic perspectives for the local and international economy. Particularly, it noted that it foresees solid growth in domestic demand and that the economic recovery in the U.S. and the Eurozone remains on track, while it expects a slowdown in some emerging economies. Furthermore, the Bank stated that it expects that international monetary policy will remain accommodative: it foresees a slow adjustment of liquidity in the U.S. and an expansionary stance of monetary policy in other developed economies for an extended period of time. In terms of price developments, the Bank said that annual inflation rose in March and moved in closer to the Central Bank's 3.0% target. The next policy meeting is scheduled for 30 May.
LatinFocus Consensus Forecast panelists see the policy rate at 4.16% at the end of 2014. Panelists expect the policy rate to end 2015 at 4.83%.
Author: Armando Ciccarelli, Head of Data Solutions