Banco de la Republica de Colombia’s board keeps benchmark rate at 4˝%

By Caroline Salls

Pittsburgh, Oct. 31 – The board of directors of the Banco de la Republica de Colombia decided to maintain its benchmark interest rate at 4˝%, according to a news release.

The board said the new projections of global economic activity for the remainder of 2014 and 2015 suggest that the average growth of Colombia’s business partners will be less than estimated earlier.

Specifically, the bank said external demand will be driven mainly by the economy of the United States, while a low dynamic is expected for the euro zone. Also, the directors said China will have a slowdown, and some partners of the region will continue to grow at rates lower than their average of recent years.

The directors said the risk premiums of several emerging countries have deteriorated and their currencies have depreciated against the dollar in an environment of slowing economies and falling prices of basic goods they export.

In addition, the bank said the international price of oil has fallen below forecasted levels, leading to a deterioration in the terms of the country’s trade. The board said international coffee prices remain high and the prices of other commodities have fallen. If trade terms continue to fall, the board said the growth of the national income will be adversely affected.

In Colombia, new indicators suggest that gross domestic product growth in the third quarter was similar to that predicted in previous months, according to the release. The board said the behavior of retail sales, consumer credit, the consumer confidence index and the labor market indicates that consumption remains strong.

The bank said foreign trade indicators suggest that net exports had a negative contribution to growth, with growth estimated to be between 4.5% and 5.5%.

According to the release, annual inflation in September was 2.86%, which was in line with expectations. The board said the average of the four indicators of core inflation declined and stood at 2.63%. Estimates suggest that inflation may be in the upper half of the target range at year-end, the release said.

The directors said expectations remain around 3%.

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