No Colombian Interest Rate Hike this Month

August 31, 2016

By a 6-1 vote, the Board of the Central Bank of the Republic of Colombia agreed to leave its interest rate benchmark at 7.75%. That decision broke a string of 11 straight monthly hikes, nine by 25 basis points and two by 50 basis points. The dissenting vote wanted a 25-basis point increase. CPI inflation of 9.0% total still exceeds the nominal interest rate level, but a statement¬†from the Board notes that the inflation stems from the lagged impact of peso depreciation and a weather-related food price shock. Measures of expected inflation are contained at 4.6% for the year head and 3.7% over a 2-year horizon. The current account gap is narrowing, and economic growth last quarter was lower than assumed. A pause was deemed appropriate by the Board’s majority.

Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission. 

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