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:
- Annual consumer inflation in September stood at 3.23%, and the average of core inflation indicators declined once more (3.28%).
- Inflation expectations recorded slight changes and remain above 3.0%. Analysts’ expectations stand at 3.3%, and those embedded in public debt bonds at around 3.5%.
- The average growth of the country’s trading partners has been somewhat weaker than estimated. The international price of oil and the terms of trade continue at levels that favor national income.
- Global risk aversion has increased. In this environment, the risk premia for emerging countries including Colombia have increased slightly, and their currencies have depreciated vis-à-vis the US dollar.
- Economic activity indicators for the third quarter suggest that the economy would have continued growing at a similar pace as in the first half of the year. The technical staff considers that the underuse of the productive capacity of the economy persists.
- For 2018, a current account deficit as a share of GDP similar to the one recorded in 2017 is forecast.
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 and its expected convergence to the 3.0% target.
- The effects of changing international financial conditions on the Colombian economy.
In this environment, upon assessing the situation of the economy and balance of risks, the Board of Directors 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 the monetary policy will depend on the availability of new information.
The decision to maintain the benchmark interest rate at 4.25% was approved unanimously.