Banco de la República maintains the benchmark interest rate at 4.25%


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The Board of Directors of Banco de la República, in its meeting today, decided to maintain the benchmark interest rate at 4.25%. For this decision, the Board mainly took into account the following aspects:

  • In November, yearly inflation and the average of core inflation indicators fell, standing at 3.27% and 3.26%, respectively.
  • Inflation expectations recorded slight changes and remain above 3.0%. To horizons greater than or equal to a year, analysts’ expectations stand around 3.4%, and those embedded in public debt bonds close to 3.8%. 
  • The Fed increased its benchmark interest rate, and fewer increases are expected in 2019 vis-à-vis the previous quarter. The fall in oil prices and a lower global growth perspective have been reflected in upward pressures on the country's risk premia and exchange rate. 
  • In the third quarter, the dynamics of domestic demand turned out better than expected, mainly driven by investment in construction. The economic activity indicators for the fourth quarter suggest that output growth would be slightly higher than that in the third quarter. With this, the technical staff maintained the economic growth forecast for 2018 at 2.6%, and estimates that under-utilization of the country's productive capacity persists. 
  • For 2018, a slightly higher current account deficit as a share of GDP than in 2017 is projected.

 

Based on this information, the Board considered the following factors for its decision: 

  • Weakness of the economic activity and uncertainty over its pace of recovery. 
  • Observed inflation, its expected convergence to the 3.0% target, and the risks associated with it. 
  • The effects on the Colombian economy arising from the changing external conditions. 

 

In this environment, upon assessing the economic situation and the risk balance, the Board deemed appropriate to maintain the benchmark interest rate at 4.25%.

The Board will continue to carefully monitor the behavior of inflation and the forecasts for economic activity and inflation in the country, as well as the international context. Finally, the Board reiterates that monetary policy will depend on the availability of new information.

The decision to maintain the benchmark interest rate at 4.25% was approved unanimously by the Board of Directors.

Bogotá

 

Friday, 21 December 2018
12:27

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