Nine Central Bank Rate Hikes Within a Year in Colombia

February 27, 2012

The Central Bank of the Republic of Colombia on February 24 announced a 25-basis point increase of its overnight lending rate, which now becomes 5.25%.  The first of nine such hikes of equal size was made on February 28, 2011.  Subsequent moves were done in March, April, May, June, July and November of 2011 as well as January and now February of 2012.  In tightening again, the central bank is out of step with a majority of other monetary authorities that have either stopped lifting interest rates or begun easing.  A statement from the Monetary Board members presents an upbeat view on Colombian growth, which hit a 19-month high in 3Q11 and seems to have exhibited continuing strong momentum last quarter and in the current one.  Officials are determined to resist an uptick of expected inflation, which is in the upper quadrant of a 2-4% target range, and have also responded to excessive growth in household borrowing.  Risk factors include the euro debt situation and elevated world oil prices, each of which could result in slower-than-assumed export market demand.  The next meeting of the Board of Directors is scheduled for March 23.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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