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Colombia opts to maintain policy rate at 3¼%; inflation up slightly
By Tali David
Minneapolis, April 29 - The board of directors of Colombia's Banco de la Republica decided to keep the benchmark interest rate unchanged at 3¼% at its meeting on Monday.
The board said that on the international scene, the economic indicators for the first quarter of the year show modest growth in the United States, recession in Europe, and a slight slowdown in China. In Japan, the central bank announced a strong monetary stimulus program.
In March, annual inflation accelerated slightly to 1.91%, and there were no significant changes in the measurements of core inflation. The average of these measurements as well as most indicators of inflation expectations are below target at 3%.
The first-quarter data suggest economic activity in Colombia has slowed compared to what was observed in 2012. On the demand side, the rate of growth in household consumption would have declined, as evidenced by the changes in the indicators for retail trade, household confidence and credit. On the supply side, the available indicators for industry continue to show deterioration.
The bank's technical team forecasts between 3% and 5% GDP growth for all of 2013, with 4.3% being the most likely figure.
The board said that by March, the policy interest rate cuts had passed through to the nominal interest rates in the market. Interest on consumer lending, preferential loans and micro-credit reacted to a similar degree or more than the bank's rate, while interest rates on ordinary commercial loans, mortgages and credit card lending were slower to respond.
The board said it will continue its careful monitoring of performance and projections with respect to economic activity and inflation in Colombia, asset markets and the international situation.
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