Colombia lowers intervention interest rate to 5% as growth weakens

By Tali David

Minneapolis, July 30 - The Central Bank of Colombia's board of directors decided to lower its intervention interest rate by 25 basis points to 5%, according to minutes released by the bank on Monday. The decision was unanimous, with some board members proposing an even higher reduction than the one adopted.

The bank noted that growth continues to weaken more than expected worldwide. According to bank information, the growth rate is slower in the United States and continues to contract in Europe. In China and other emerging economies, growth slowdown is higher than predicted, thus mirroring a weakening world demand and previous political actions.

The weakening of the economy worldwide is limiting Colombian economic growth through lower external demand and lower international prices for major export products, the bank said.

In June, annual inflation was 3.2%, below the figure projected by the bank's technical team. All core inflation measures dropped, and their average stood close to 3%.

Inflation expectations also decreased: 3.1% is expected for December 2012 and about 3.3% for July 2013, with those deriving from the treasury 'TES' bonds at horizons between two and five years expected to be 2.5%.

The new information will enable the bank to establish new monetary policy actions concerning both the development of events in the advanced countries, their impact on confidence, global demand and international commodity prices and internal dynamics, the release said.

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