BOGOTA, April 25 Colombia's central bank
unexpectedly raised the benchmark lending rate for the first
time in more than two years on Friday, as policymakers sought to
ward off inflationary pressure as economic growth gathers pace.
The following is a translation by Reuters of the bank's
statement accompanying the decision:
The Board of the Central Bank at its meeting today decided
to raise the interest rate by 25 bp, and took it to 3.5%. For
this decision, the Board took into consideration the following
In March, inflation and the average of the four basic
inflation measures continued their convergence towards its
target of 3 percent. For its part, inflation expectations for
the year by economic analysts and those implicit in sovereign
bonds, have fluctuated around the long-term inflation target.
The macroeconomic prognostic indicates that internal demand
will continue growing at a good pace and that the economy will
approach its full productive capacity in 2014. At the same time,
the unemployment rate, not taking seasonal factors into account,
has maintained its downward trend and is reaching the lowest
level so far this century.
As much as inflation is converging to the 3% target, the
different real interest rates have been falling. In March, the
growth in total credit accelerated slightly, driven by the
behaviour of lending to businesses and mortgages.
Risk premiums for several emerging economies have fallen
recently, financial assets in local currency have risen in value
and their currencies have appreciated versus the dollar. The
prior changes have been accentuated in Colombia, especially in
the public debt market, as a result of greater inflows of
Recent global economic activity data suggests that the world
recovery will continue in 2014. In the United States the most
recent figures indicate that its economic activity could
maintain a gradual recovery, while expanion in the Euro zone
would continue at a modest pace. The slow-down of some emerging
economies could accentuate. With that, it is probable that in
2014 average growth of trade partners in Colombia would be
similar to the increase registered in 2013 and that the average
of the terms of trade remain at high levels.
Expectations for a slow adjustment in liquidity in the
United States are maintained. In this way, it is expected that
the expansive monetary stance in other advanced economies will
persist for a prolonged period. External interest rates have not
presented significant changes and remain at low levels although
above the average seen in 2013.
In the circumstances described, the Board considers that
macroeconomic stability and the current convergence of inflation
towards the long term goal, are compatible with a slightly less
expansive monetary policy stance, a little less expansive than
the current one. It also considers that a gradual and opportune
adjustment of the aforementioned reduces the need for sudden
adjustments in the future and ensures macroeconomic stability.
Taking all of this into account and the delays with which
monetary policy actions affect inflation and growth, the board
considered prudent to increase by 25 basis points the
intervention interest rate.
The Board will continue to monitor carefully the behaviour
and forecasts for economic activity and inflation in the
country, of the financial asset markets and the international
situation. Finally it reiterates that the monetary policy will
depend on available information.
(Editing by Peter Murphy)