Colombia’s Central Bank kept the country’s interest rate unchanged at 3.5% in its monetary policy meeting on Friday.
The record low rate was not cut further, despite fears that the dramatic decrease in trade with Venezuela, formerly the country’s second biggest trading partner, will damage the economy.
Last year saw the interest rate slashed in successive monetary policy meetings, from 10% in December 2008 to its present level, to avert the effects of the global economic crisis.
Now, with the economy on the mend, the threat of inflation has become pressing, discouraging the bank from carrying out any further cuts.
The bank’s decision was unanimous, says its head Jose Dario Uribe.
“The available information shows that quarterly gross domestic product levels continue to recover,” Uribe continued. “The bank’s board expects the actual interest rate level will continue to stimulate economic growth in an environment characterized by a healthy financial system,” the banker said, as quoted by Bloomberg.
The decision to keep rates level follows December’s monetary policy meeting, in which the bank made the same judgement to leave the rate at 3.5%.
Uribe announced last week that trade with Venezuela was expected drop 60% in 2010, a fall of $1.5 billion. This is a significant blow to Colombia’s economy, but is outweighed by concerns about the rising rate of inflation.