* One member called for interest rate to be steady
* Inflation is below bank target range
* Bank reduced the rate to 4.25 percent
By Helen Murphy and Luis Jaime Acosta
BOGOTA, Jan 4 Some members of Colombia's central
bank called for a larger, half-point cut in the benchmark
lending rate at last month's policy meeting, saying growth
showed signs of deterioration, the meeting's minutes showed on
The majority of the seven-member board on Dec. 21 voted to
reduce the lending rate one-quarter point to 4.25 percent after
surprisingly weak third-quarter gross domestic product data. One
member called for the rate to be maintained at 4.5 percent.
"Other members underlined the fact that almost all the
indicators on the economy's progress indicate it is obviously
deteriorating," the minutes said, referring to those calling for
a rate cut to 4 percent. It was the final board meeting of 2012.
"Industry is contracting ... in the midst of a sharp fall in
the rate of growth of domestic demand for nationally produced
After keeping the rate steady since August, the bank last
month cut borrowing costs, joining countries like Brazil that
sought to shield their domestic economies from slack overseas
Feeble quarterly GDP numbers in construction, mining and
civil works set off alarms that the global crisis had hit
Colombia harder than previously thought and may further damage
the nation's economic drivers in the coming months.
"The growth rates of large scale mining are dropping
considerably and construction is evidently contracting," the
members calling for a bigger cut argued in the minutes.
The central bank said growth in 2012 would likely be less
than 4 percent and pick up again this year.
The majority of the board members felt that a quarter point
reduction was appropriate given the "sharper-than-expected"
slowdown in the economy blamed partly on the international
economic crisis reducing appetite for Colombian goods.
They raised concern about a contraction in spending in civil
works and housing but argued that would soon be overcome.
"This tightening is largely explained by exogenous factors
that are administrative and regulatory in type and that could be
overcome, although only partially, in the short term," the
majority of the board said.
They also highlighted stable inflation.
Annual inflation in November at 2.77 percent, below the
bank's target range of 2 percent to 4 percent, provides room for
a further cut down the line if necessary, economists said.
The call for a half-point reduction "increases the
likelihood of more cuts," said Camilo Perez, analyst at Banco de
Inflation data for December and full year 2012 will be
released on Saturday.
ONE CALL FOR HOLD
The government has been under pressure from industrialists,
retailers and exporters to bolster growth as weak demand and a
strong currency raised concerns factories could start to
consider layoffs just as the jobless rate is falling.
Industrial production rose a timid 1.2 percent in October
after two months of falling output. Exports rose 5.8 percent in
October, well below the export growth a year earlier of more
than 32 percent.
Retail sales slipped 0.3 percent in October, after a 6.1
percent increase the year before. That followed a reduction in
household spending after the bank slowed lending earlier in 2012
by raising reserve requirements on consumer credit.
One board member argued that the rate at 4.5 percent was
historically low and a sufficient level since household credit
remained high. Additional cuts would move the rate further away
from what could be considered neutral in an economy that has not
suffered from a financial crisis, he said.
The slowdown in the economy was not the only factor to
consider in monetary policy and cutting too much could increase
"vulnerability" in the productive sector, he said.
"The current policy posture is expansionary and suitable for
alleviating a moderate output gap without exacerbating the
vulnerabilities of the productive sector," he argued.