Colombian Benchmark Interest Rate Left at 4.0%

October 23, 2009

The Bank of the Republic of Colombia did not cut its key rate further.  The decision matched consensus expectations.  After two months of not reducing the rate in July and August, policymakers had surprised analysts with a 50-bp reduction in September.  Cuts in all six months of 1H09 had cumulated to 500 basis points.  Economic growth reverted to positive territory in the second quarter of 2.7% annualized, but the on-year change of GDP stayed in the red at minus 0.5%.  Industrial production in July was 6.5% lower than a year earlier.  The recession and falling commodity prices brought CPI inflation down to 3.2% in September from 7.6% a year earlier and a peak of 7.9% in October 2008.  While inflation is now below target, officials want to avoid stimulating monetary policy much further, lest inflation rise through the target band and above it in the year ahead.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.


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