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Economy

Bonds drop after central bank raises inflation target

by Adriaan Alsema November 22, 2008

Colombia’s peso bonds dropped after
the central bank announced a 2009 inflation target that’s above
this year’s goal. 

Policy makers said they’ll target inflation next year
between 4.5 percent and 5.5 percent, up from a 3.5 percent-to-4.5
percent range this year.

“This hurts the central bank’s credibility and impacts
long-term inflation expectations,” said Camilo Perez, head
economist with Banco de Bogota SA, Colombia’s second-biggest
bank.

Central bankers also held the interbank lending rate target
at a seven-year high of 10 percent at today’s meeting.

The yield on the nation’s benchmark 11 percent bonds due in
July 2020 rose 14 basis points, or 0.14 percentage point, to
12.74 percent at 3:46 p.m. in New York, according to Colombia’s
stock exchange. The bonds’ price dropped 0.74 centavo to 89.572
centavos per peso.

Annual inflation is running above target. It jumped to 7.9
percent last month, the highest since October 2001. Central
bankers also said they target inflation in 2010 of 4 percent. (Bloomberg)

 

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