Colombia’s central bank on Friday held its benchmark interest rate steady for the second straight month, as expected, on signs of support for the local economy and a mixed picture abroad.
The majority decision by policymakers to hold the rate at 4.75 percent followed a likely slowdown in Latin America’s No. 4 economy in the third quarter on weaker retail sales, industrial output and exports.
After seven hours of debate, the bank said that the economy continued to be supported by robust consumer confidence, the availability of internal and external financing and foreign direct investment.
Even with lower global demand, prices remain high for key Colombian commodity exports like oil, the bank added.
“Despite signs of slowdown, expansion will continue in the coming quarters driven by domestic demand,” the bank said in a statement following its decision.
“A healthy financial system, the confidence of households and a dynamic labor market will continue to support growth in consumption,” policymakers added.
The monetary authority gave a nod to the weak global economy, especially in Europe and the United States, but said that the slowdown in some major emerging market economies appeared to be “stabilizing”.
“In this context and without inflationary pressures, it is to be expected that foreign interest rates remain low for a prolonged period,” the statement said.
The bank said inflation expectations remained near the midpoint of its 2-4 percent target range. It maintained its economic growth estimate for this year at between 3 percent and 5 percent, and said it would be similar next year.
In a Reuters survey on Monday, 16 of 22 economists expected the central bank to maintain the overnight lending rate for the second consecutive month. The remaining six analysts saw a 25 basis-point cut. In the region, major economies such as Mexico and Chile have held rates steady since early this year as they gauge fallout from the euro zone debt crisis.
At the bank’s September meeting, the majority of the seven-member board voted to hold borrowing costs steady while a minority wanted to cut the rate to protect the economy from the global slowdown.
The central bank and the government have been buying dollars to prevent the strengthening of the peso currency, which has firmed 6.47 percent so far this year.
Finance Minister Mauricio Cardenas said that the government had bought $641 million in the year to Oct. 18.