Banco de la República decides not to change its benchmark rate

In a meeting today, the Board of Directors of Banco de la República decided to leave its benchmark interest rate at 9.75%.

Annual inflation in March was 5.93%. This is 42 bp less than in April, essentially because of lower food prices. However, inflation in regulated prices increased, as did several core inflation indicators.

Available figures show the monetary-policy measures adopted in recent months have achieved the desired results.   Loan growth has slowed, particularly in the case of commercial and retail loans.  The various indicators of inflation expectations are still high, but have declined.

The Board underscored the continued positive momentum in the Colombian economy. The first-quarter average for the consumer confidence indicator remained high, and merchandise exports in the early months of the year increased at rates above those registered at the end of 2007.   The sharp rise in imports of capital goods suggests that private investment remains strong.

The external context continues to be characterized by the uncertainty surrounding the economic situation in the United States and how it might affect the world economy.  Yet, so far, export performance, terms of trade and foreign direct investment reflect an external environment that is favorable to Colombia’s economic growth.

In addition, the Board decided to reinforce control over capital coming into the country by requiring a deposit on import funding beyond six months.  The deposit also apples to cases where residents are indirect recipients of resources from foreign loans used to set up companies outside the country.

The Board will continue to monitor the international situation closely, and will keep an eye on inflation and growth trends and forecasts.  The members reiterated that the course of monetary policy in the future will be determined by new information, as it becomes available.