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Banco de la Republica de Colombia raises benchmark rate 25 bps to 7½%
By Caroline Salls
Pittsburgh, June 22 – The board of directors of the Banco de la Republica de Colombia decided to increase its benchmark interest rate by 25 basis points to 7½%, according to a news release.
The board said annual consumer inflation rose in May and reached 8.2%, while the average of the measures of inflation decreased to 6.3%.
The bank said an increase in food prices and a transfer of the depreciation to consumer prices continue to exert upward pressure on inflation.
In addition, the board said global economic activity numbers suggest a lower-than-expected dynamic of global products, raising an expectation that average growth of trading partners of the country in 2016 will be lower than that registered in 2015.
The board said the expected pace of adjustment of monetary policy in the United States, international interest rates and country risk premiums are lower than those observed at the beginning of the year. Also, oil prices remain higher than projected for the current year, meaning the terms of trade and national income could fall less than expected at the beginning of the year.
According to the release, first-quarter economic growth was in line with bank estimates. Domestic demand slowed less than expected. Exports increased more than projected and imports fell less, the bank said.
The board said the country’s current account deficit is correcting gradually, and the risk of an excessive deceleration of domestic demand remains weak, while inflation has accelerated.
The bank said the setting of monetary policy will continue to contribute to the correction of the external deficit.
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