Colombia’s Central Bank again voted to keep the country’s interest rate unchanged at 3.5% in Friday’s monetary policy meeting.
This is the third successive monthly meeting at which the bank has decided to leave the rate unchanged, after reducing the rate by 6.5 points in successive meetings over the course of 2009. The bank slashed the benchmark interest rate from 10% in December 2008 to its current record low, in an attempt to boost Colombia’s economy during the global downturn.
The danger of inflation informed the bank’s decision not to cut rates further. According to the bank’s head Jose Dario Uribe, the decision took into account the slight increase in inflation in January, and the probable impact of the El Niño phenomenon, which damages crops and therefore raises prices.
However, the bank judged that rates need not be raised to combat inflation, as inflation levels are predicted to remain within the bank’s target range for 2010 of between 2 and 4%.
The need to keep interest rates low in order to help the economy recover from the downturn was also important in the decision not to raise rates. “Available information shows that the quarterly GDP levels are still slowly recovering,” said Uribe.
“The economy could do with an additional boost, but the bank isn’t too worried about inflation right now because the dry weather is transitory and it would be a mistake to throw in the towel on reactivating the economy,” an economist at Bulltick Capital in Miami told Bloomberg,