Central Bank of Colombia

February 1, 2016

Colombian monetary policymakers like to change their interest rate in consecutive monthly moves.  From 5.25%, the rate was sliced by 25 basis points each in July and August, followed by five straight cuts totaling 150 basis points from November 2012 through March 2013.  When an initial 25-basis point rate hike was done a year later in March 2014, it was followed by a similarly sized hike in the five ensuing months to August 2014.  A new streak of consecutive increases began in September 2015, followed by a 50-bp increase in October and thus far three more 25-bp advances of 25 basis points in November, December and January 29.

The central bank Board released a statement after this past Friday’s increase that noted elevated measures of expected inflation and accelerating actual inflation caused by the effects of peso depreciation and climbing food costs.  CPI inflation ended 2015 at 6.77%, with a core rate of 6.43%.  Officials estimate that real GDP likely rose about 3.0% last year.  The statement gave no indication that the new rate level of 6.0% is deemed sufficiently high to secure a drop in inflation to target.  January’s action is simply noted to be a continuing tightening of policy that underscores the commitment to the inflation objective.  But the statement also mentions that officials will be carefully monitoring “asset markets and the international situation” as well as the “the behavior and projections of economic activity and inflation” in Colombia.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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