* Rate decision was unanimous
* Benchmark rate held steady for third straight month
* Low inflation leaves policymakers room to stimulate growth
By Helen Murphy and Peter Murphy
BOGOTA, June 28 Colombia's central bank held its
benchmark lending rate steady for a third straight month on
Friday as benign inflation allowed policymakers to keep
borrowing costs low enough to nourish anemic growth in the
In a unanimous decision, the bank's seven-member board kept
the rate at 3.25 percent, as expected, holding borrowing costs
at the lowest level in Latin America. No foreign exchange
measures were taken.
Colombia has cut its key interest rate by 200 basis points
since July last year to counter weak international demand for
its commodity exports and a slowdown in domestic demand in the
$330 billion economy. In March, the bank accelerated cuts,
slashing the rate by 50 basis points to the current level.
"It is generally expected that Colombian economic growth
will increase throughout the year to the extent that aggregate
spending reacts to previous monetary policy decisions and to a
national government plan," the board said in a statement after
releasing the rate decision.
In April, the government unveiled a series of measures aimed
at stimulating growth in the manufacturing and agricultural
Annual growth in the first quarter was 2.8 percent, missing
Finance Minister Mauricio Cardenas' estimate of 3 percent, but
meeting the central bank's forecast. For full year 2013, the
government has lowered its forecast to 4.5 percent from an
earlier 4.8 percent, but most economists polled by Reuters
think that is too optimistic.
Last year, economic growth eased to 4 percent from 6.6
percent in 2011.
Inflation is closer to the lower end of the bank's target
range of 2 percent to 4 percent, giving it some room to boost
growth, according to analysts.
"The language of (Friday's) statement didn't change too much
from the last, and even though the board made mention of the
recent situation in global markets and the tendency of higher
interest rates in local debt markets it didn't seem too
concerned about its impact on Colombia's economy," Daniel
Valandia, economist at Creditcorp Capital said in a note to
Yields on local sovereign bonds have shot up about two
percentage points in the last month on expectations the United
States will rein in expansionary monetary policy, a notion
reinforced by remarks by U.S. Federal Reserve Chairman Ben
Bernanke last week.
EYE ON THE PESO
Some economists had expected the board to alter its dollar
purchase program after Bernanke's comments that the Fed would
likely slow the pace of stimulative bond purchases in 2013 if
the U.S. economy continues to grow. The remarks caused the
Colombian peso to weaken significantly.
Colombia's central bank, headed by Jose Dario Uribe, has
bought millions of dollars daily on the spot market for months
to ease gains in the currency, which last year was among the
world's strongest, but some board members have raised concerns
about the impact of continuing the program for too long.
The government is fighting to boost exports and industrial
production, which have dragged down overall growth in the
economy as factories have struggled with a strong peso.
Strong currencies hit exporters the most since salaries,
pensions and health benefits are paid in local currency, but
overseas buyers pay in devalued dollars.
The peso closed at 1,922.77 per dollar on Friday.