Banco de la República Holds Its Intervention Interest Rate Steady
At a meeting today, the Board of Directors of Banco de la República left its intervention interest rate unchanged. As a result, the repo auction base rate will remain at 3%. This decision was taken in light of the following factors.
Annual consumer inflation in August was 2.31%, which is slightly more than was anticipated by the market and by Banco de la República’s technical team. However, the outcome for inflation in August is consistent with the technical team’s forecasts; these suggest, with a high degree of confidence, that inflation will be near the mid-point of the long-term target range in 2010 and 2011 ((3% +/- 1pp).
The indicators of core inflation (which does not include the prices of more volatile items, such as food) remained stable and inflation expectations continued at low levels.
The information received in the last few weeks indicates the Colombian economy is growing at the expected rate, without brining inflationary pressures to bear. The momentum in the economy has been fueled by consumer confidence, more corporate investment and recovery of the loan portfolio in the financial system.
Growth in Europe and the United States probably will not live up to earlier estimates. In contrast, Asia and Latin America show better growth rates. The Colombian economy continues to perform in an environment that favors the sustainability of its growth.
The Board of Directors evaluated the results of its exchange strategy and ratified its decision to coordinate measures with the Ministry of Finance and Public Credit to reinforce the instruments for intervention and sterilization. Likewise, international reserves will continue to be accumulated for at least four months, through daily purchases of at least US$20 million via competitive auctions.
The Board of Directors believes the stance of its monetary policy has contributed to economic growth in Colombia, without jeopardizing the inflation target.
The Board of Directors will continue to keep a close watch on the international situation and on forecasts and performance with respect to inflation and growth. It also reiterated that monetary policy in the future will depend on whatever new information becomes available.
Bogotá, Colombia
