Banco de la Republica de Colombia keeps benchmark interest rate at 7˝%

By Caroline Salls

Pittsburgh, Jan. 27 – The board of directors of the Banco de la Republica de Colombia decided to keep its benchmark interest rate at 7˝%, according to a news release.

Four members of the board voted to keep the rate unchanged, while three voted for a 25 basis points reduction.

The board said annual consumer inflation and the average of the measures of core inflation decreased in December and stood at 5.75% and 5.60%, respectively. Inflation expectations are 3.8% and 4.8%, respectively.

The bank said the effects of strong transitory supply shocks that diverted the inflation off the target is still diluting, as indicated by the slowdown in the consumer price index for food and, to a lesser extent, the recent behavior of prices.

New figures for 2016 global economic activity indicate that the average growth of Colombia’s trading partners were higher than estimated a quarter ago, the release said. The board said this means it is likely that the recovery of external demand in 2017 will be slightly higher than projected three months ago.

In addition, the bank said long-term international interest rates increased, and Colombian trade terms continued to recover. In this environment, the board said the peso has appreciated against the dollar.

According to the release, uncertainty about international financial and trade conditions has increased since the board’s last meeting, which could impact global interest rates and the evolution of the dollar.

In Colombia, the bank said several of the indicators of economic activity and perception for the fourth quarter of 2016 suggest that the economy was somewhat better than in the third quarter.

As a result, the bank reduced its growth estimates for 2016 to 1.8% from 2%.

The board said Colombia’s current account deficit for 2016 is projected to be 4.5% of gross domestic product, equivalent to $12.6 billion.

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