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Economy

Central bank to extend rate hikes, sees strong growth

by Adriaan Alsema June 10, 2011

Colombia news - Central bank

Colombia’s central bank is set to continue with its cycle rate hikes as the economy continues to gain speed, according to minute from the bank’s last monetary policy meeting.

The minutes from the central bank’s May 30 meeting, where it raised its benchmark rate by a fourth consecutive time to leave it at 4%, show that the bank estimates that the economy could have expanded between 3.9% and 5.5% in the first quarter.

The official gross domestic product figures are set to be released June 23 by the government’s statistics agency.

The central bank also defended its decision to increase rates by highlighting that economic output is close to its potential and that consumption continues to drive economic activity.

“All the lending components continue to grow at significant rates and there has been a build-up in household debt as well,” the central bank said in the minutes.

Inflation expectations, meanwhile, have declined and “for the short and mid-term have adjusted downward and are within the target range” of 2% to 4%, the central bank said in the minutes. Consumer prices increased 3.02% in the 12 months through May.

Colombia’s benchmark interest rate stood at a historical low of 3.0% for nine months until February when the bank began raising rates amid inflation worries and signs rates were too low for an economy that was starting to gain speed. The central bank estimates that the economy could expand as much as 6% this year.

The bank also announced in its May 30 meeting that it was extending a program in which it buys a minimum of $20 million daily in dollars at least until Sept. 30 in the foreign exchange market to prevent unwanted peso strength. The central bank didn’t explain that decision in the minutes released Friday.

Central Bankeconomyinterest rates

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