The Banco de la República reduces its intervention interest rate by 100 basic points

At today´s meeting the Board of Directors of the Banco de la República reduced its intervention interest rate by 100 basic points.  Thus, the base rate for expansion auctions will be 7%.

The annual inflation rate for the consumer in February was 6.47%, the fourth consecutive monthly fall.  This decline was seen in the prices of foodstuffs.  The indicators for basic inflation  rose during the month, while inflation expectations lay within the target range set by the Board (5%+/- 1/2 percentage point).

The reduction of inflation and inflation expectations confirm that the weakness of internal and external demand and the fall in the international prices of basic products are being reflected in weaker inflationary pressures. The Board now has more confidence that annual inflation will continue to fall in the following months and will lie  within the target range at the end of 2009.

The world economy continues to present a negative panorama. During the month international agencies like the IMF and World Bank issued projections of negative growths in the world economy in 2009. This fall has led Latin America to show a strong deceleration in economic growth and caused many central banks to reduce their reference rates. The devaluation of the region´s currencies registered between January and February was corrected in March, especially in Colombia, where the recent devaluation of the peso had been greater than that observed in other countries.

The Colombian economy has shown a greater resistance to the world crisis despite the fall in external demand which is reflected in a weaker dynamic in exports and the consequent weakening of growth. The latest data on industry and commerce signal strong falls. In these conditions, and taking into account the low level of utilized capacity, it is expected the country´s inflation will continue to fall.

The accumulated reduction of 300 basic points in the intervention interest rate have stimulated economic growth. It has been possible to make these policy decisions rapidly, considering that recent developments in Colombia and the world create a balance of risks  that tends to be low, both for economic activity and inflation.

The Board will continue to undertake a careful monitoring of the international situation,  the performance and projections of inflation and growth, and reiterates that future monetary policy will depend on new information as it becomes available. Bogotá,