Colombian Base Rate Remains at 3.0%

May 27, 2010

The Colombian Central Bank of the Republic is keeping a 3.0% base rate.  In a newly released statement, officials attributed slightly higher CPI inflation of 2.0% in April to transitory special factors, noted that core inflation is in the lower part of a 2-4% target band, and spoke about the still uncertain impact of Europe’s debt crisis.  The 3.0% base rate seven percentage points below the prior cyclical peak.  The first cut of 50 basis points was made in December 2008.  Eight reductions spaced through 2009 were half by 100 basis points and half by 50 basis points.  After five months of static policy, a tenth rate cut from 3.5% to 3.0% announced April 30 caught analysts by surprise.  GDP rose 2.5% between the final quarters of 2008 and 2009, but unemployment is nearly at 12%. There is no hurry to start normalizing interest rates.  In fact, the previous policy statement left the door open to the possibility of another rate cut in the future.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



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