National interest rates are to be held at 3.25% for another month according to a statement released by Colombia’s Central Bank on Friday.
This decision marks the continuation of a historically low interest rate, which the Central Bank has maintained since March 2012. According to Managing Director of the Central Bank, Jose Dario Uribe, the decision was made after a “detailed analysis of the situation of the economy, inflation and international issues.”
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When interest rates are low it is easier to get a loan, which also usually causes prices to rise. However the central bank has been taking advantage of the low inflation, due to temporary supply shocks that reduced food prices and electricity.
According to a statement by the International Monetary Fund (IMF) last week, Colombia is currently economically strong enough to raise interest rates. Yet the announcement on Friday stated that interest rates would stay the same.
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“As temporary factors disappear and inflation gradually approach the midpoint of the target range of 3 %, we believe [Colombia] could increase the interest rate, leading to a level close to neutral inflation,” stated IMF Chief of Mission Valerie Cerra.
The Central Bank’s technical team have maintained the forecasted economic growth between 3.3 % and 5.3%.
Moreover, the Central Bank decided to continue the current program of purchasing international reserves for three more months. This is predicted result in an accumulation of U.S. $ 1 billion between April and June.