The Central Bank of Colombia holds its intervention interest rate steady

At a meeting today, the Board of Directors of the Central Bank of Colombia left its intervention interest rate unchanged. Accordingly, the base repo auction rate will remain at 3%. This decision was taken in light of the following factors:

Annual consumer inflation in April was 1.98%. This is slightly higher than in March (14 bp), but within what was anticipated by the Central Bank’s technical team.

The indicators of core inflation (which does not include the prices of more volatile items such as food) continued to decline and are in the lower part of the long-term target range set for inflation by the Board (3% +/-1%). Inflation expectations continued to subside.

The outcome for inflation during the past month is consistent with the technical team’s forecasts, which show – with a high degree of confidence - that inflation during 2010 and 2011 will be within the long-term target range.

The information received in recent weeks indicates the economy has been recovering faster than expected, without generating inflationary pressure.  Factors such as added confidence among market players and the momentum in several leading indicators confirm the increase in growth.

Global economic recovery has been affected by the public debt crisis in Greece and its possible contagion to other European countries.  The effects of that crisis are still uncertain. However, the recovery in Asia, the United States and the Latin American economies is growing strong.

The Board believes the expansive monetary policy it adopted, including the recent 50 bp cut in its benchmark rate, contributes to economic growth in an environment characterized by a healthy financial system.

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

Bogotá, Colombia