Colombia’s central bank said one reason for raising interest rates to 3.75% on April 29 was to ensure financial stability.
“Very low rates of interest over a prolonged period of time could generate risks regarding financial sustainability, sustainable growth and future inflation. An exceptionally low interest rate could be inconsistent with growth expected in 2011 and 2012.”
The minutes from the meeting of the board of directors of Colombia’s central bank, released Friday reveal the factors that drove the 7 member board to raise interest rate by 25 basis points and the country’s growth forecast by 50 basis points to between 4% and 6%.
The board also cited the increase in the price of basic goods, the increase of inflationary pressures and the increase of rate of interest by other central banks in Latin America and Asia as other considerations to taken into account when they made their decision.