Banco de la Republica de Colombia’s board keeps benchmark rate at 4˝%

By Caroline Salls

Pittsburgh, Dec. 19 – The board of directors of the Banco de la Republica de Colombia decided to maintain its benchmark interest rate at 4˝%, according to a news release.

Taking into account the levels achieved in various indicators of risk, as well as recent changes in the conditions of the foreign exchange market, the bank also said its board of directors decided to not continue buying international reserves.

The board said international oil prices have fallen considerably, reflecting increases in supply, lower demand and the dollar’s increased strength. The bank said uncertainty about the future price of oil is high.

The fall in the price of oil and the increase in international prices of some foods have generated a deterioration in the terms of Colombia’s trade, negatively affecting the growth of its national income, the release said.

In addition, the board said currencies in several emerging countries are still depreciating, risk premiums have gone up and the price of financial assets has fallen. The bank said the peso-dollar exchange rate has risen considerably and showed high volatility.

According to the release, the performance of global economic activity remains weak. The board said the U.S. economy continues to recover, while growth in Japan and the euro area remains low. Also, the bank said growth in major emerging countries continues to slow.

The board said it is feasible that the recovery of Colombia’s business partners by 2015 is, on average, weaker than estimated in previous months.

In Colombia, the bank said the 4.2% growth of the gross domestic product for the third quarter was less than the 4.6% expected.

The board said consumer confidence and retail, automobile and consumer credit sales suggest that domestic demand is still dynamic, but other indicators, like industry and oil production, recorded low annual increases.

Inflation at the end of 2014 will be placed in the upper half of the target range, the release said. However, the board said deviation from the central point of 3% is temporary and can be explained mainly by correction of a transitory fall in some prices in the past and by temporary increases in others.

Core inflation is below 3%, and overall inflation is expected to converge to that value, according to the release.

© 2015 Prospect News.
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