The Colombian Central Bank’s influence on the peso exchange rate is limited because of the power of international capital funds, Juan Jose Echavarria, one of the seven members of the bank’s board of directors, said Tuesday.
“The Bank and most economists doubt the capacity of the Central Bank to detain the [appreciation] of the peso in the long run,” Echavarria told reporters after delivering a lecture in Bogota. “In the short term, we can affect the exchange rate but what we can achieve on the peso is limited.”
He said that what the Bank of the Republic can do, through direct intervention in the currency market, is to slow the peso’s appreciation and reduce its volatility.
The peso has appreciated 13% this year, potentially hurting Colombian exports. The Central Bank has said it will buy up to COPthree trillion (US$1.5 billion) in pesos and local-government bonds in a bid to tame the peso’s appreciation and provide liquidity to the country’s economy.
Echavarria said the central bank’s intervention to tame the peso may heat up the economy. (Dow Jones)