Mexico and Colombia: Central Bank Rates Left Unchanged

April 26, 2013

It’s not just the wealthier nations that are experiencing slower growth.  Mexico and Colombia are two Latin American economies that are growing below potential.

Bank of Mexico officials had implemented a 50-basis point cut of its key interest rate in July.  That was the first reduction since July 2009.  There was not a follow-up move in April.  Officials kept such at 4.0%, acting cautiously in the face of inflation moving above the 2-4% target to 4.7% in March from 3.6% in February and 3.25% in January.  A statement from officials called inflation’s rise temporary, predicted slower-than-desired growth, and expressed concern about the strength of the peso. 

Between July 2012 and March 2013, policymakers at the Bank of the Republic of Colombia reversed nearly all of a 225-basis point tightening during the year to February 2012.  In a statement released today, they decided to pause the easing following a larger 50-bp cut in March.  A minority of analysts had anticipated another reduction.  Colombian inflation is below the 2-4% target, and GDP is projected to expand at a sub-potential pace.  As in Mexico, the latest data on Colombian retail sales and industrial production were disappointing.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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