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Colombia News | Colombia Reports
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Economy

Central Bank keeps key rate unchanged

by Adriaan Alsema September 19, 2008

Colombia’s central bank on
Friday said it kept its key interest rate unchanged at 10
percent as it said the country’s economy was growing at a
slower pace than had been expected.

The rate decision was widely expected by the market as
recent indicators — industrial production in particular —
have shown slower economic expansion.

“The information available shows economic activity growing
at a slower rhythm than expected, in Colombia, as in most other
countries,” said Bank of the Republic director Jose Dario Uribe told
reporters after announcing the decision.

“Tighter monetary conditions and an increase in food and
fuel prices have weakened demand,” he said.

The bank’s board voted by a majority to keep its key rate
unchanged. In its last meeting in August the bank also held the
rate steady but by a unanimous decision.

A Reuters poll this week found analysts all agreed that the
bank would maintain the benchmark rate at 10 percent as the
board focuses on second-quarter GDP figures scheduled to be
released next week.

But inflation remains above the bank’s forecast range of
3.5 percent to 4.5 percent for 2008. A poll by the central bank
recently found on average analysts expected annual inflation
will close this year at 7.29 percent.

The bank must balance increasing signs of slower growth
with inflation expectations and may seek a rate cut as its next
move, said Goldman Sachs analyst Alberto Ramos, who said the
bank could ease monetary policy in the second quarter of 2009.

“But if the growth dynamics deteriorate and the global
backdrop continues to worsen we do not rule out the beginning
at a rate easing cycle earlier than that,” he said. (Reuters)

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