Banco de la República Holds Its Interest Rate Unchanged

At a meeting today, the Board of Directors of Banco de la República agreed, by majority vote, to leave its intervention interest rate unchanged. Consequently, the repo auction base rate will remain at 10%. 

Annual consumer inflation was 7.87% by August, which is 35 bp more than the month before. Once again, the rise in food and regulated prices was responsible for the increase, fueled in part by the behavior of international commodity prices.  The latter have dropped recently. 

The averages of the core inflation indicators declined slightly for the first time this year.  Non-tradable inflation, excluding food and regulated prices, was down for the second month in a row, having accumulated a reduction of 60 basis points in the past year.  Inflation expectations for the mid-term declined as well, but are still high. 

Available information shows the increase in economic activity in Colombia and in most countries is less that expected.  Demand has been weakened by tighter monetary conditions and higher food and fuel prices. In addition, production costs have been boosted by the rise in international prices for raw materials. This lowers supply, while elevating prices. 

The international crisis worsened during the past month, especially in the United States. This affected the prices of certain assets in Colombia, particularly the peso exchange rate against the dollar, which has been quite volatile of late.  The uncertainty on international financial markets is expected to continue, and it is unknown exactly how world economic growth and the availability of resources for emerging economies will be affected.

The Board will continue to carefully monitor the international situation, as well as the behavior and forecasts for inflation and growth. It reiterated that monetary policy in the future will depend on whatever new information becomes available.