Colombian Interbank Rate Held at 4.5%

July 24, 2009

The Bank of the Republic left its key rate unchanged at 4.5%, as officials had hinted a month ago it was likely to do.  Six rate cuts in consecutive months of 50 bps each in January and June sandwiched around four straight declines of 100 bps are expected to provide enough stimulus.  Quarter-on-quarter growth turned positive in 1Q, albeit 0.9% saar, and on-year growth was still negative.  Industrial production is down 6.5% from a year ago.  The 500 basis points of rate relief from 9.5% to 4.5% is considered sufficient to promote recovery, and the target interest rate is only 70 basis points above the 3.8% year-on-year rate of CPI inflation.  The budget and current account deficits each surpass 3% of GDP.

Copyright Larry Greenberg 2009.


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