Central Bank raises interest rate and growth forecast

The benchmark interest rate was raised by 25 basis points to 3.75% and growth forecast by 50 basis points to between 4% and 6% by the board of directors at Colombia’s Central Bank Friday.

The Central Bank said that its new interest rate would continue to support the growth of productivity and employment in the short-term. It added that the interest rate will serve to keep inflation within the target range for this year and the next and help to avoid future financial imbalances.

Central Bank President Jose Dario Uribe said that despite the devastating rainy season and its effect on food prices, the rate of inflation in Colombia by the end of 2011 will be around 3%, reported Caracol Radio.

The technical team also decided to increase the forecast rate of growth of the Colombian economy by 50 basis points to between 4% and 6%. Previously the forecast rate was between 3.5% and 5.5% though in an interview April 16 Uribe predicted a growth rate of 5.5%.

This was the third consecutive month that the bank raised the interest rate. The interest rate in February was raised for the first time in two and a half years and again in March in what the Central Bank has called a gradual tightening cycle, according to Reuters.

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