Banco de la Republica de Colombia cuts benchmark interest rate to 4¼%

By Caroline Salls

Pittsburgh, April 30 – The board of directors of the Banco de la Republica de Colombia unanimously decided to reduce its benchmark interest rate by 25 basis points to 4¼%, according to a news release.

The board said annual inflation and the average of basic inflation measures fell again more than expected in March to 3.14% and 3.64%, respectively.

The bank said a slowdown in the consumer price index, excluding food and other basic inflation measures, explained the lower rate of increase in consumer prices, and a reversal of transitory shocks that occurred in 2017, the appreciation of the peso and a broad food supply explain the drop in quarterly inflation.

According to the release, inflation expectations have fallen. Those of analysts for December 2018 and 2019 are on average at 3.37% and 3.16%, respectively. Those derived from public debt papers at two years, three years and five years are between 3% and 3.3%.

The board said external demand continues to recover, marked by the developed economies and the main emerging economies. Oil prices increased again and exceed the averages recorded in the last two years, and, according to the release, the increase in the terms of trade and the expected dynamics of external demand would continue to favor the recovery of the country’s external revenues.

Because the indicators of economic activity available so far this year suggest that the economy would continue with low growth, albeit higher than growth registered in 2017, the bank said it maintained its growth estimate for 2018 at 2.7 %.

The bank said the lower inflation observed against its forecast and the reduction in inflation expectations could suggest a faster convergence of inflation to the target, although upward risks persist, including a rebound in the price of food that affects expectations and delays the convergence of inflation to 3%.

The board said it will continue to carefully monitor the behavior of inflation and projections of economic activity and inflation in the country, as well as the international situation. In addition, the bank said monetary policy will depend on any available new information.

© 2015 Prospect News.
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