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Banco de la Republica de Colombia raises benchmark rate 50 bps to 7%
By Caroline Salls
Pittsburgh, April 29 – The board of directors of the Banco de la Republica de Colombia decided to increase its benchmark interest rate by 50 basis points to 7% in order to ensure the convergence of inflation to the target in 2017 and contribute to the reduction in a current account deficit, according to a news release.
The board said annual consumer inflation and the measures of basic inflation increased in March and stood at 7.98% and 6.29%, respectively.
The bank said a strong increase in food prices, as well as the nominal depreciation and its partial transmission to consumer prices explains to a large extent the increase in inflation.
New global economic activity suggests that in 2016 the average growth in Colombia’s trading partners will be weak and inferior to that registered in 2015, the release said.
The board said the U.S. Federal Reserve kept its reference rate of interest unchanged, and it is likely that the tightening of monetary policy in the United States will be slower.
In addition, the bank said the price of crude oil rose and stood above the forecast for this year. In this environment, the measures of country risk fell and the peso appreciated against the dollar.
First-quarter data indicates that consumption grew at a rate similar to that registered a quarter ago and that the investment slowed, the bank said. On the supply side, the trade in and production of coffee was favorable, while mining reported deterioration.
As a result, the bank said it is projecting first-quarter growth between 1.8% and 3.2%, with the most likely figure being 2.5%. For all of 2016, growth is projected to be between 1.5% and 3.2%.
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