The Central Bank of Colombia Holds its Intervention Interest Rate Steady

At a meeting today, the Board of Directors of the Central Bank of Colombia agreed not to change the intervention interest rate, holding it steady at 3.50%.  That decision was based on the following factors:

• Annual consumer inflation in November was 2.37%, prolonging the downturn observed throughout the year. The core inflation indicators (which do not include the more volatile items, such as food) continued to decline.  Inflation expectations were down as well, and are now within the range determined by the Board for next year, which coincides with the long-term range for inflation (between 2% and 4%).

• November witnessed a generalized price reduction for a number of items in the basket, encompassing a wide range of goods services.  Accordingly, inflation at year’s end will be below the mid-point in the long-term target (3%) and close to 2%.

• Although the external context has improved in recent months, economic recovery in the developed countries remains slow.  The intermediate and long-term prospects for the Latin American economies and for other emerging countries are more favorable.  Nevertheless, the growth projections for Venezuela show a significant drop in GDP, both for this year and in 2010.

• The information at hand shows continued recovery in quarterly GDP levels, with low annual growth rates.

• The Central Bank’s expansive monetary policy has allowed for the steady reduction in interest rates on deposits and lending. The Board of Directors expects the benchmark rate, as it now stands, to continue to stimulate economic growth in an environment characterized by a healthy financial system.

The Board of Directors will continue to keep a close eye on the international situation, inflation and inflation forecasts and economic performance.  It reiterated that future monetary policy will depend on whatever new information becomes available.