Colombia: Tightening cycle continues in April
April 29, 2011
At its latest monetary policy meeting held on 29 April, the Central Bank raised the reference interest rate by 25 basis points to 3.75%. The move constituted a third consecutive month of rate hikes after policymakers began to gradually withdraw monetary stimulus following their meeting on 25 February. The decision made by the Central Bank was broadly anticipated by the market and further increases in interest rates should continue throughout the year. Expanding global and domestic economic growth propelled the decision made by the Central Bank. As the economy continues to gain momentum, the policymakers' decision aims to sustain the current rate of growth while preventing the economy from overheating. Although the Bank mentioned that prices for certain commodities such as oil and food continue to add inflationary pressures to economies worldwide, inflation in Colombia remained stable at 3.2% in March, which currently sits within the 1.0 percentage point tolerance margin of the Central Bank's 3.0% target. Moreover, core inflation, which excludes more volatile items such as fresh food and fuels, has remained stable throughout the last 12 months. Additionally, the Central Bank announced that it will maintain its daily dollar purchases of at least USD 20 million in order to alleviate the appreciation of the Colombian peso. In April alone, the domestic currency appreciated 11.4% against the US dollar over the same month last year. The next monetary policy meeting is due to be held on 27 May.