Banco de la República, the Central Bank of Colombia, maintains the intervention interest rate unaltered

The Board of Directors of Banco de la Republica, in their meeting held today, decided to keep unchanged the intervention interest rate at 4.5%. This decision was made after due consideration of the following:  

• The international context has deteriorated in the weeks subsequent to the past meeting of the Board. Fears regarding the sovereign debt have been growing, and growth predictions in the United States and Europe in 2011 and 20012 have been revised downward.  
   
• In certain Asian and Latin American economies, the new information points out to some moderation in growth. Although International prizes for basic products have gone down, they still remain at high levels.
   
• In Colombia, data for the first semester showed economic activity expanding at a good (5%) rate, similar to that previously projected.  
   
• Growth has been propelled by the strong dynamism of internal demand, particularly from the private sector with an annual rate of 11.7% in the second quarter. For the third quarter, the new information currently available suggests that growth may be higher than recorded in the first semester. Thus, the probability of the growth-prediction range (between 4.5% - 6.5%) for 2011 is still high.
   
• The annual growth in bank credit became stabilized at a high rate in an environment of real interest rates on loans that, in spite of their increases, are still below their historical averages. Consumption remains being the most dynamic portfolio, with increases almost threefold the nominal GDP growth estimated for 2011.
   

The new housing price index continued to increase and reached in July the maximum record of the series, as calculated since 1997.

Inflation expectations at different terms, as well as inflation projects for the end of 2011 and 2012, have shown no major changes and remain within the target range. 

In this context, the risk balance was not modified substantially vis-à-vis the previous month.  For this reason, the Board deemed appropriate to keep the pause in the increments in the intervention interest rate. Likewise, it believes that it maintains the current rate level keeps it in a good position to answer to the new information regarding global and national economy.

The Board will continue to carefully monitor the international situation along with the behavior and projections of inflation, growth, and the performance of asset markets, while insisting that the monetary policy will depend on the new information available.

Finally, considering the recent behavior of the exchange market as well as greater uncertainty in the international economy, the Board did not renew the program for the daily purchase of international reserves. In turn, considering the extreme volatility seen in the financial markets, Banco de la Republica will call for auctions at the spot market for an amount of US$200 million any time the so-called Market Representative Rate (“TRM”) shows 2% or more (downward or upward) deviations from its 10-order moving average. 

Bogotá