Banco de la Republica keeps the benchmark interest rate at 3.25%
At today’s session, the Board of Directors of the Banco de la Republica decided to keep the benchmark interest rate at 3.25%. In making this decision, the Board took the following aspects into consideration:
- There are no major changes in the outlook for worldwide growth in 2014 with respect to the ones described in the recently published Inflation Report. Worldwide growth in 2014 is projected to surpass that of 2013 by a little more than half a percentage point. The gradual recovery of the advanced economies continues and the new data from emerging countries has confirmed the expected slowdown in their growth rate. For 2014, the average growth for Colombia’s trading partners will be above that registered in 2013.
- Foreign interest rates and the price of the dollar are surpassing the averages seen in 2013. It is likely that a significant part of these increases will be permanent to the degree that they are due to less expansionary global levels of liquidity.
- The international price for petroleum remains at high levels and the price for Colombian coffee has surpassed the average registered for 2013. The prices for coal and nickel stopped falling. Therefore, it is likely that the terms of trade will remain at favorable levels.
- The technical team predicts that economic growth for the fourth quarter of 2013 will be between 4% and 5% with 4.6% being the most probable figure. Household consumption will have grown at rates similar to its historical average. Investment will have shown the highest rise. Exports will have surged but not as strongly as imports. In the area of supply, construction (buildings and public works) and agriculture will have presented the highest growth. The mining sector will have slowed down and growth of industry (which includes coffee bean threshing) will have been almost zero. Based on this information, the Colombian economy is calculated to have grown between 3.7% and 4.3% in 2013 with 4.1% as the most probable figure.
- Economic growth is projected to be between 3.3% and 5.3% in 2014 with 4.3% being the most probable percentage.
- In January, the total growth of loans slowed down although it is still at rates that are higher than the rise in the nominal GDP. The nominal interest rates for loans increased, but in real terms, they remained stable and are at levels that drive economic growth.
- Annual inflation in January was 2.13% and thus within the target range. Furthermore, the average of the core inflation measurements was 2.55%. The inflation expectations of economic analysts for a year from now as well as those derived from public debt paper with maturities of less than five years are around 3%.
To summarize, the prediction for economic growth in 2013 is that it will be similar to what was seen the previous year. The interest rates have remained at levels that stimulate aggregate expenditures and, in 2014, they are expected to contribute to making the output approach the productive capacity of the economy and inflation converge towards the target of 3%. Having evaluated the balance of risks, the Board of Directors decided it would be appropriate to keep the benchmark interest rate unaltered.
The Board will continue to monitor the performance and projections for economic activity and inflation in the country, the asset markets, and international situation carefully. Finally, they reiterate that the monetary policy will depend on the information available.
Published: 03/03/2014
