Banco de la Republica keeps the intervention interest rate unaltered at 5.25%

The Board of Directors of Banco de la Republica, the Central Bank of Colombia, in its session today has decided to keep the intervention interest rate unaltered at 5.25%. This decision was made upon having taken the following into account:    

• Global growth has declined in the second semester of this year.  In the United States, information available suggests a slower growth pace while, in Europe, several indicators show that economy in the eurozone is contracting. The problems confronted in this region have affected world’s economic perspectives through confidence, and the trade and capital flows. The emerging economies show a more moderate expansion rate that reflects in the weakening of exports and industrial production.
   
• Like in other emerging countries, the effects of a weakening global economy have been felt in Colombia through reduced demand and lower prices for the country’s exports. This has led to growth deceleration, particularly in tradable sectors other than mining. Both industrial production in March and April and agriculture GDP in the first quarter of the year have contracted.
   
• Civil works construction fell in the first quarter, a phenomenon not having been envisaged in the Bank’s projections. In contrast, the financial, commercial, and transport and communication sectors showed remarkable dynamism propelled by growth in domestic demand which, in turn, has been encouraged by favorable levels of confidence and finance.
   
• Generally, economic growth in Colombia during the first semester has been lower than expected. The GDP growth figure in the first quarter stood close to the lower limit of the target range predicted by the Bank’s technical team for that period.
   
• Annual growth in the commercial loan portfolio continues to slow down. Although household credits have been moderate, growth rates, particularly for consumer credit, remain high. The mortgage loan portfolio is growing at a good pace, along with a new-house price index which increased again in March and continues to be at historically high levels.
   
• The annual inflation rate in May was 3.44%, similar to the April’s figure. The averages of base inflations, as well as the one to five-year mean inflation expectations, stand at a rate slightly higher than 3%.
   
• According to the evaluation of the current balance of risks, the Board ha decided to keep it intervention interest rate unaltered. The  new information will enable the Bank to establish new monetary policy actions for both that concerning the evolution of events taking place in the advanced countries and their impact on confidence, global demand, and international prices for basic goods, and that originating in internal dynamics.
   
• The Board reiterates that Banco de la Republica has both the tools and sufficient resources to meet local and foreign currency liquidity needs normally required by the economy, as well as those likely to occur in an environment of international financial turbulence.
   
• The Board will continue to carry on its careful monitoring of the international situation, inflation behavior and projections, as well as growth, and asset-market performance, while reiterating that the monetary policy will depend on the new information available.

Bogota