Board of Colombia's Banco de la Republica keeps 3¼% benchmark rate

By Caroline Salls

Pittsburgh, July 26 - The board of directors of the Banco de la Republica of Colombia kept the benchmark interest rate at 3¼%, according to a news release.

The board said global economic growth is still modest, with significant differences between countries.

While the European contraction persists, a rapid recovery of productive activity has been observed in Japan.

In the United States, the strengthening of private demand is being partially offset by fiscal consolidation and has led to a slight decrease in the growth projection, the board noted.

In addition, the expansion of much of the emerging economies of Asia and Latin America continues to be robust but lower than expected.

As a result, the growth of Colombia's trading partners and trade terms are expected to be less than in 2012.

The board said the strengthening of the dollar and the increase in long-term external interest rates observed in May and June were reversed in July. The same was observed in risk premiums and the roles of the region's public debt interest rates.

Higher production of oil and ferronickel and coffee in the second quarter and the increase in the growth rate of industrial foreign sales in dollars suggest a better export performance, the board said.

According to the release, the increase in consumer confidence and the greater rate of increase in retail trade also indicate an acceleration of private consumption.

On the supply side, the board said the acceleration of the economy originated mainly in mining, agriculture and trade.

2013 outlook

The board said the bank's technical team reduced its likely growth forecast for 2013 to 4% from 4.3%, with a range between 3% and 4.5%. The reduction partly stems from the observed behavior of the world economy and private spending, which has been weaker than expected.

The board said it hopes Colombian economic growth will increase throughout the year as total spending reacts to previous monetary policy measures and programs that the national government is running.

According to the release, the growth of bank credit in national and foreign currency shows signs of stabilizing at a higher rate than nominal GDP growth. Credit interest rates continue to decline and are below their historical averages, except for credit cards.

June annual inflation of 2.16% and the 2.5% average of basic inflation were slightly higher than the previous month, the board stated. The average inflation expectations of analysts and those calculated from rates of public debt is similar to the inflation target of 3%, the release said.

The board said it will continue to monitor the behavior and projections of economic activity and inflation in Colombia, assets markets and the international situation.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.