Gustavo Petro sworn in as Colombia’s new president
The men and women who will govern Colombia...
Colombia to seek decriminalization of drugs despite US...
Colombia’s failing state | Part 6: indigenous under...
How serious is Colombia’s president-elect about fighting corruption?
How violent Colombia became while Duque was in...
Medellin’s secret history of violence against women and...
How hostility to the press ended up isolating...
Rebuilding Colombia Reports after 4 years of devastating...
Colombia and Venezuela to mend ruptured ties
  • About
  • Support
  • Newsletter
  • Contact
Colombia News | Colombia Reports
  • News
    • General
    • Analysis
    • War and peace
    • Elections
    • Economy
    • Culture
    • Sports
    • Science and Tech
  • Travel
    • General
    • Bogota
    • Medellin
    • Cali
    • Cartagena
    • Antioquia
    • Caribbean
    • Pacific
    • Coffee region
    • Amazon
    • Southwest Colombia
    • Northeast Colombia
    • Central Colombia
  • Data
    • Economy
    • Crime and security
    • War and peace
    • Development
    • Cities
    • Regions
    • Provinces
  • Profiles
    • Organized crime
    • Politics
    • Armed conflict
    • Economy
    • Sports
  • Lite
  • Opinion
Economy

Colombian central bank unexpectedly raises rate to 5%

by Adriaan Alsema January 30, 2012

Colombia news - Central bank

Colombia’s central bank unexpectedly raised borrowing costs after the economy expanded at the fastest pace since 2006, defying President Juan Manuel Santos who said an increase wouldn’t be appropriate.

The seven-member board, led by bank chief Jose Dario Uribe, raised the overnight interest rate by a quarter point to 5 percent today, as forecast by only one of 31 economists surveyed by Bloomberg. Thirty analysts expected no change.

“The latest information suggests that in the fourth quarter, the Colombian economy continued to show strong momentum,” policy makers said in their statement. “Bank lending continued to show high rates of increases and consumer credit behavior suggests that households are significantly raising their level of leverage.”

Infrastructure projects and a wave of foreign investment in oil, coal and gold exploration in areas that were once overrun by guerrillas may keep economic growth near a five-year high, said economist Andres Langebaek. Gross domestic product expanded 7.7 percent in the third quarter from a year ago, leading the central bank to project growth of as much as 6 percent for 2011 overall.

“Third-quarter GDP growth was quite good and it appears the fourth quarter also will be, with public works as the main positive factor,” Langebaek, an analyst at Banco Davivienda SA in Bogota. A “light but concerning increase in inflation expectations” for 2012 would have also been a factor in any rate increase, he said.

Inflation ended 2011 at 3.73 percent, within the central bank’s target of 2 percent to 4 percent. Prices will rise about 3.5 percent this year, according the median estimate of 35 economists in a January central bank survey, compared with 3.4 percent in December’s survey and 3.06 percent in May.

The central bank cited risks of a “disorderly adjustment” in European debt markets and signs that the domestic economy is slowing in its decision to leave interest rates unchanged last month.

Santos said last month it wouldn’t be “appropriate” for the bank to raise rates again at a time when other central banks are cutting them.

Brazil, Chile, Russia, the Philippines, Israel, Romania, Moldova, and Mauritius all reduced benchmark lending rates within the past two months amid concerns Europe’s debt crisis will derail global growth.

In a bid to ease gains in the currency, the central bank said Oct. 28 it will sell $200 million in dollar options whenever the peso’s 20-day moving average changes by more than 4 percent. No options have been auctioned since the announcement.

In the year to date, Colombia’s peso has rallied to trade at a three-month high against the dollar. On Jan. 27, the currency gained 0.2 percent to 1807.03 per dollar, its strongest closing level since Sept. 9’s end-of-day 1798.00.

Central Bankeconomyinterest rates

Trending

  • Colombia to seek decriminalization of drugs despite US objections

  • Medellin’s secret history of violence against women and girls

  • How serious is Colombia’s president-elect about fighting corruption?

Related articles

  • Colombia’s state-run oil company clashes with incoming government

  • Gross domestic product

  • Labor and unemployment

  • RSS

@2008-2019 - Colombia Reports. All Rights Reserved.
Powered by Digitale Zaken and Parrolabs


Back To Top