Slumping demand and lower
prices would slow Colombian inflation, the central bank’s chief
said on Friday, fueling market expectations bank policy-makers
would cut interest rates aggressively next week to bolster
Central bank director, Jose Dario Uribe, on Friday said
inflation could fall below 5 percent this year, within the
bank’s target range, while the latest analysis shows 2009
economic growth could slow to between 1 and 2 percent.
“The technical analysis shows a probability that inflation
will be below 5 percent due to less demand and lower
international prices of basic products,” Uribe told reporters
after a public conference.
After the news, yields on local TES bonds due in May 2009
trimmed to 7.77 percent from 7.85 percent at the previous close
while November 2010 TES bond yields dipped to 7.74 percent from
7.75 percent previously.
Joining other Latin American countries, Colombia’s central
bank cut its key interest rate for the first time in three
years in December and in February slashed its rate by 100 basis
points to 8 percent to spur economic growth.
The central bank could cut rates by at least 50 basis
points when it meets on Friday, according to a recent bank poll
of economists. But some expect a more aggressive decision.
“We expect the bank to deliver at least another 75 basis
points of easing in March, with another 100 basis point rate
cut quite likely,” Goldman Sachs senior economist Alberto Ramos
said in a research note.
But in minutes from its last meeting released on Friday,
the bank warned over maintaining credibility in its policies
while slashing its benchmark rate.
Inflationary pressures had weighed on previous bank
decisions as directors debated how far to ease monetary policy
with the economy showing clear signs of slowdown, especially in
slumping industrial production.
The central bank has said it expects inflation to fall to
between 4.5 percent and 5.5 percent this year. Consumer prices
rose 7.67 percent in 2008.
Uribe said the most recent analysis by the bank’s
economists indicated the country’s economic growth would
probably be between 1 and 2 percent this year. The central bank
had initially projected growth between 1 percent and 3
The government is more optimistic, forecasting 2009 growth
at around 3 percent. Colombia’s gross domestic product figures
for 2008 are scheduled to be released at the end of March. (Reuters)