Banco de la Republica de Colombia's board keeps benchmark rate at 3¼%

By Caroline Salls

Pittsburgh, Dec. 2 - The board of directors of the Banco de la Republica de Colombia decided to keep the benchmark interest rate at 3¼%, according to a news release.

In addition, the board reaffirmed its commitment to the goal of long-term inflation of 3%. The board defined an inflation target of 3% for legal purposes in 2014, with a range of plus or minus one percentage point.

The bank said global external demand recovered slowly in the third quarter, punctuated mainly by developed countries. The board said growth in both the United States and the euro area were better than projected.

The large emerging economies of Asia and Latin America grew unevenly, and the board said most have lower rates of expansion potential.

According to the release, U.S. Treasury bond interest rates have been relatively stable but higher than those observed before May. However, the board said uncertainty about the onset and rate of normalization of monetary policy in the United States is high.

The bank said the terms of trade in Colombia remain high but lower than in previous years.

The board said September industrial production, excluding coffee threshing, fell on an annual basis. Yearly retail sales growth was also low, the release said.

However, the bank said October saw a recovery in household confidence and improved dynamic sales and durable goods sales in the view of traders.

The board said the growth of energy demand and increased industry surveys suggest a rise in shipments and production expectations.

Total credit growth slowed in October, according to the release, but remains higher than the increase in nominal gross domestic product. Most nominal interest rates of credit declined in the month.

The board said annual consumer inflation showed an unexpected sharp decline to 1.84% in October from 2.27% in September, mainly because of a drop in the rate of increase in food prices.

The bank said economic growth in 2013 is expected to be similar to that observed in 2012.

To the extent that the food supply shock is diluted, the board said inflation and expectations should return to the target range and resume convergence towards the long-term target of 3%.

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