Posted by Wesley Tomaselli on Aug 30, 2013 Leave a comment

Colombia central bank holds key rate at 3.25%

Colombia central bank holds key rate at 3.25%

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Colombia’s central bank held its benchmark interest rate at 3.25% after policy makers voted on Friday, according to a statement issued by Banco de la Republica, Colombia’s central bank.

Central Bank President Juan Dario Uribe and his team of policy makers are pursuing an expansionary monetary policy, where they hope to stimulate a contracting industrial sector by taking advantage of steady, low inflation in a climate of global volatility and uncertainty.

“Annual inflation in July (2.2%) was somewhat lower than what was estimated by our technical team and average basic inflation remained relatively stable at 2.5%,” said the central bank in a statement.

Low inflation numbers let the bank keep its rate relatively low with little worry of flooding the market with cheap pesos.

Juan Dario Uribe’s team of policy makers also explained in the statement that GDP and domestic consumption growth was stronger in the second quarter of 2013 when compared to 1Q. Growth on the supply side, it said, will continue to be driven by agriculture, trade, and mining.

Colombia’s economy is dependent on a strong agricultural base, but recent agrarian protests across the country have called the stability of Colombia’s agriculture sector into question.

“We are protesting. Why? Because we’re broke,” Benjamin Morales, a potato farmer from central Colombia, told Colombia Reports during protests in downtown Bogota on Thursday. Morales says that high costs and low prices are putting him in the red, and, unlike coffee growers, Morales says that he and other potato growers do not receive subsidies or other sources of government support.

Camilo Perez, Chief Economist at Banco de Bogota, told Bloomberg, “The unrest will probably curb economic growth this quarter.”

A shrinking manufacturing sector is also evolving into a vulnerable spot for the Colombian economy. Policy makers are betting on a weak peso to help turn it around.

Manufacturing contracted for the 7th month out of the last 8 months, according to data from Colombia’s statistical agency DANE.

MORE: As peso weakens, Colombia’s manufacturers still hurting over US trade deal

While the peso weakened to a high of 1,941.62 pesos to the dollar on Thursday, however, some manufacturers still claim it will take years before the industrial sector sees better days.



Banco de la Republica mantiene la tasa de interes de referencia en 3.25%  (Banco de la Republica)

Colombia holds interest rates and leaves door open for cut (Bloomberg)

Currency Data, USD:COP (Google Finance)