Board of Directors of the Central Bank of Colombia agreed to make no change in the intervention interest rate

At a meeting today, the Board of Directors of the Central Bank of Colombia agreed to make no change in the intervention interest rate. Accordingly, the repo auction base rate will remain at 3.50%. This decision was based on the following factors:

Annual consumer inflation ended the year at 2%. The indicators of core inflation (which excludes the prices of the more volatile items such as food) continued to decline, while expectations for inflation one year out remain within the target range set by the Board of Directors, which coincides with the long-term range (between 2% and 4%).

December witnessed another generalized decline in prices for the various items in the basket, encompassing a wide variety of goods and services.

The world economy continued to recover, thanks largely to growth in the Asian countries.  The rise in international trade and higher commodity prices are a reflection of this revival and prompted an increase in the growth forecasts for 2010.  The medium and long-term outlook for the region’s economies and for other emerging countries remains favorable. However, the growth forecasts for Venezuela were revised downward once again.

The information at hand shows quarterly GDP levels continue to recover. There also are indications that aggregate demand is on the mend. These signs include an improvement in the confidence indicator for consumers and the industrial sector associated with the construction of civil works, stabilization of the indicators for installed capacity, and the recovery in raw material imports.

The expansive monetary policy has allowed for a steady decline in interest rates on deposits and lending. The Board of Directors expects the benchmark rate, as it now stands, to continue to stimulate economic growth in an environment characterized by a stable financial system.   

The Board of Directors will continue to keep a close eye on the international situation and on performance and forecasts with respect to inflation and economic growth.  It reiterated that future monetary policy will depend on whatever new information becomes available.