The Colombian central bank board voted unanimously to cut rates by 100
basis points to 7% at its March 20 monetary meeting as economic
activity weakened at a faster-than-expected pace and as inflation
continues to decelerate, according to minutes released Friday of the
board’s last meeting.
The board kept accelerating its rate cutting as macroeconomic data showed the Colombian economy is deteriorating fast.
“Economic activity continues to weaken faster than the Bank’s technical
team had anticipated,” the central bank acknowledged Friday.
The central bank evaluated industrial production and retail sales
figures. It also studied unemployment and electricity consumption
figures, among others.
The central bank added that the 300 basis point rate cut since December fuels economic growth.
Falling inflation and inflation expectations as a result of the
weakened internal demand and the drop of international prices of basic
products also contributed to the rate-cut decision, the monetary
authority said.
“As a result, it is possible to anticipate that annual inflation will
continue to fall in the coming months and will be within the target
range by the end of 2009,” the board said.
The central bank has set a target range of 4.5%-5.5% for this year.
The annual inflation fell through February to 6.47%, from 7.17% in
January as a sharp decline in domestic demand and relatively low
commodity prices kept consumer price pressures contained.
The board added that the Colombian economy has shown resistance to the
world crisis in spite of the drop in external demand, which gets
reflected in lower exports and the deterioration of growth. (Dow Jones)