Colombia’s central bank held its benchmark interest rate steady on Thursday, meeting market expectations, as benign inflation allows policymakers to maintain their economic stimulus while global conditions remain uncertain.
The seven-member board voted unanimously to maintain the rate at 4.5%, as predicted by 31 of 32 analysts forecast in a Reuters poll earlier this week. It was raised to that level in August at after a series of quarter-point hikes that began in April.
“New projections for world economic activity for the remainder of 2014 and 2015 suggest that the average growth of our business partners will be less than estimated earlier,” the board’s statement read.
“External demand will be driven mainly by the US economy, while low dynamism is expected in the Euro Zone. China will have a slowdown, and some partner countries in the region will grow at less than their average rates of recent years.”
The bank narrowed its forecast range for 2014 GDP growth to 4.5 percent to 5.5 percent versus its previous estimate of 4.2 percent to 5.8 percent. It kept its estimate for the most likely growth unchanged at 5 percent.
Economic growth in 2015 would likely be lower than this year but it would still be above 4 percent, central bank chief Jose Dario Uribe said.
The sharp fall in crude oil prices this quarter has cut revenue from taxes and royalties in the Andean nation, prompting the government to present a tax reform that would replace those missing funds.
“The country can be assured that the fiscal stimulus we have been giving until now will be maintained next year, because corporate results this year are those which will determine fiscal income in 2015,” Finance Minister Mauricio Cardenas said.
(Reporting by Helen Murphy; Editing by Alan Crosby and Richard Chang)