BOGOTA, Jan 7 (Reuters) - Colombia central bank board member Adolfo Meisel expects the benchmark lending rate to remain steady for “some time” but says another cut may be necessary if inflation slows further, according to a local newspaper report published on Tuesday.
Meisel, one of seven policymakers on the bank’s board, said in an interview with daily newspaper El Tiempo that borrowing costs, at 3.25 percent, were at “a good level.” He added, however, that a more expansionist monetary policy might be needed if inflation slips further below the bottom rung of the bank’s target range.
“If it drops too much below the target range, well, we would have to think about a monetary policy that’s more expansionist,” the newspaper quotes Meisel as saying. “That means lowering the rate.”
Inflation ended 2013 at 1.94 percent, below the bank’s goal of between 2 percent and 4 percent.
The board maintained the benchmark interest rate at 3.25 percent for the ninth straight month in December as the economy began to pick up steam after a weak start to the year.
Colombia’s economy, which relies on commodities like oil, coal and coffee, grew 5.1 percent in the third quarter, beating expectations and accelerating from 2.8 percent in the first quarter and 3.9 percent in the second. The growth helped take the GDP closer to the government’s official target of 4.5 percent for 2013.
The economy expanded 4.2 percent in 2012, far below the 6.6 percent expansion in 2011.
The minutes of the last central bank board meeting on Dec. 20 indicated there had been discussion about a rate cut. Some board members said it was “necessary to evaluate the coherence of the monetary policy rate,” given the economy’s potential for faster growth and low inflation, the minutes said.
Expanding economic output has failed to bring inflation up even to the lower end of the bank’s target range and means, in one board member’s view, that the output gap is wider than previously thought.
That output gap, or the economy’s capacity to produce versus what it actually does, indicates faster growth is possible without leading to a rise in prices, the minutes said.
“If we see the economy slowing we have the possibility of reactivating it with monetary policy,” Meisel, who joined the board early last year, said in the newspaper interview. “If things remain the same with no change, I think the current posture could be held over the medium term.”