Colombia’s peso gains after rumors from Central Banker over rate increase

The Colombian Peso rose against the US dollar as Carlos Gustavo Cano, one of the seven board members of the Colombian Central Bank said that he favored raising interest rates for a fifth consecutive month in a row, local and international media reported on Tuesday.

In an interview with Colombia’s El Tiempo newspaper, Cono put the state of Colombian economic growth at “close to potential, but not above it.”  He explained that this was a range where a “normal” interest rate – one which neither slows down nor stimulates economic growth and keeps inflation in check – would help to stabilize the economy.

Cono described his desire for an additional rate increase by saying “If one makes pauses, the great risk is that you have to make bigger jumps later on, and that generates more volatility and uncertainty in the markets.”

MORE: Surging Peso hurts Colombia’s farmer exports: Wall Street Journal

Discussions within the bank’s board over how close the benchmark interest rate is to the “normal rate” will be a major issue in the run up to their meeting on August 29, when the new rate will be announced.  “In this moment, the grand discussion is what is the normal rate,” he said.

The Central Bank has raised its benchmark rate by .25% for the past 4 months in an effort to tamp down inflation as the economy grows.  The current rate is 4.25%.

Sources

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