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Colombia should keep expansive monetary policy-official
July 2, 2010 / 6:41 PM / 7 years ago

Colombia should keep expansive monetary policy-official

* Central bank has kept benchmark rate at 3 pct

* Colombia estimates economic growth of 3 pct in 2010

BOGOTA, July 2 (Reuters) - Colombia’s central bank should maintain an expansionary monetary policy through 2010 to support economic recovery in the Andean nation, one of the bank’s co-directors said on Friday.

Latin America’s No. 4 oil producer expects growth of 3 percent this year after its economy registered a paltry 0.8 percent growth in 2009 due to the global financial crisis.

“The expansive monetary policy has been key for the (economic) reactivation,” Carlos Gustavo Cano, a director at the central bank, told a conference on the state of the economy near the border with Ecuador.

“Without the risk of inflation going forward, with the output gap unclosed and given global uncertainty, the indication would be to maintain this posture for at least the rest of 2010 to facilitate the sustainability of the reactivation process in 2011 and 2012.”

The central bank lowered its benchmark interest rate by 700 basis points between November 2008 and April to spur growth, and has maintained a 3 percent rate recently.

Colombia’s economy grew 4.4 percent in the first quarter compared with a year ago in a stronger-than-expected expansion, driven by construction, mining, electricity, gas and water supplies, the national statistics agency said. [ID:nN24135960]

The bank has said that inflation continues to be below expectations. A Reuters poll of analysts forecast 0.09 percent inflation in June versus 0.10 percent in May. [ID:nN01158457]

Finance Minister Oscar Ivan Zuluaga said in June the economic recovery indicated fiscal stimulus measures should be removed to allow more expansion for the private sector, the engine of Colombia’s growth. [ID:nN15262841]

Cano -- one of seven co-directors at the bank -- said that high levels of consumer and business confidence, strong energy demand and spending on public works suggested that the economy was on track to recuperate. (Reporting by Javier Mozzo; Writing by Jack Kimball; Editing by Kenneth Barry)

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