Banco de la República will leave the benchmark interest rate unaltered

In their session today, the Board of Directors of the Banco de la Republica decided to keep the benchmark interest rate unaltered at 4.5%.  The decision was made with the following in mind:
 

• In the foreign context, the data for the second quarter point to a global growth that was smaller than what had been expected earlier.  In Asia and Latin America, regions that are very dynamic, growth has slowed down slightly due to supply factors or policy actions directed towards preventing their economies from overheating.  In contrast, in a large number of industrialized economies, including the United States, the weakening has been general.
   
• In addition, the sovereign debt problems in Europe and the debate about the debt ceiling in the United States have sharply increased the uncertainty and volatility in the international financial markets.  Consequently, the risk that worldwide economy will see lower growth has risen.
   
• Annual inflation for July rose for the third consecutive month (3.42%) especially as a result of the trend for food prices.  The average for the measurements of core inflation, in turn, rose again and passed the midpoint of the target range (3% +/- 1 percentage point).
   
• Inflation expectations for different periods of time and inflation projections for the end of 2011 and 2012 are within the target range.
   
• The available economic activity indicators confirm that the Colombian economy is maintaining a good rate of growth mainly driven by the strength of household consumption.  The consumer and industry confidence indicators are still at high levels and the growth of loans to families and businesses continues to increase in an environment of real interest rates that are lower than their historical averages.  The forecasts of GDP growth that were published in the last Inflation Report remain unchanged. 
   

Considering all of this, the Board decided it would be prudent to suspend the increases in the interest rates especially with the high uncertainty in the international financial markets and their potential negative effect on the growth of the global economy in general and the Colombian economy in particular. 

The Board will continue to monitor the international situation, the performance and projections of inflation, growth, the performance of the stock markets carefully and reiterates that the monetary policy will depend on new information as it is available.

Bogotá