Colombia Monetary Policy


Colombia: Monetary tightening continues in March

March 18, 2011

At its latest monetary policy meeting held on 18 March, the Central Bank raised the reference interest rate by 25 basis points to 3.50%. The move constituted the second consecutive month of rate hikes after policymakers began to withdraw monetary stimulus in their previous meeting on 25 February. The decision made by the Central Bank was broadly anticipated by the market and further increases in interest rates are expected to continue throughout the year. The Bank stressed that, although commodity prices continue to rise, headline inflation eased to 3.2% in February. Moreover, core inflation, which excludes more volatile items such as fresh food and fuels, has remained stable throughout the last 12 months. At the current level, inflation sits within the 1.0 percentage point tolerance margin of the Central Bank's 3.0% target. Furthermore, uncertainty regarding the debt problem within the Eurozone and the impact of the Japan earthquake weigh on the global economic outlook. Finally, as the economy continues to gain momentum, the policymakers' decision aims to sustain the current rate of growth and prevent the economy from overheating, as well as, to keep inflation within the target range. The next monetary policy meeting is due to be held on 29 April.


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