Colombia on Friday raised its benchmark interest rate for the sixth straight time this year by 25 basis points in a widely expected move to prevent Latin America's fifth largest economy from overheating.
Bank of the Republic increased by 25 basis points benchmark interest rate intervention The Board of the Central Bank at its meeting today decided to increase by 25 basis points its benchmark interest rate. Thus, the base rate for auctions will be 4.5 percent. The decision was made taking into account: - In June, annual consumer inflation increased for the second consecutive month and stood at 3.23 percent. Since March, the average measures of core inflation have seen a slight upward trend in June and reached a level close to the midpoint of the target range (3 percent + / - 1 percentage point). Inflation expectations at various horizons are also within that range. - The world economy continues to expand but at a slower rate than that observed before. The growth in advanced economies with high levels of debt shows weakness. In contrast, emerging economies, especially Asia, is still very strong. Consequently, international prices of commodities remain high. The terms of trade for commodity producing countries like Colombia are at historically high levels and contribute to the growth of national income. - In Colombia, GDP growth in the first quarter (5.1 percent) was higher than estimated by the technical team and the market average. Private demand was the most dynamic, especially the behavior of household consumption and investment other than civil works. Additionally, the consumption figures from around 2010 were revised upwards. - The recent information relating to economic activity, both in terms of supply and demand and consumer expectations and industry, indicate that GDP growth in the second quarter could be similar to that recorded at beginning of year . For the second half, the technical team expects economic activity to accelerate and therefore increased its growth forecast range to between 4.5 percent and 6.5 percent. - Credit growth continued to accelerate. All components, both those aimed at businesses as well as households, show real growth rates significantly higher than GDP growth. This situation occurs in a context where many real interest rates are at historically low levels. - In March, home prices continued to rise and approached closer their maximum level observed in 1995. The price index of new homes also increased in the first quarter. The increase in the benchmark rate aims to maintain inflation within the target range this year and next and help prevent future financial imbalances that threaten the sustained growth of the economy. The Board will continue careful monitoring of the international situation, especially risks associated with managing debt problems in a good number of advanced economies, and projections on the behavior of inflation, growth, behavior of markets assets. IT reiterated that monetary policy will depend on new information.
Source: www.reuters.com
Bank of the Republic increased by 25 basis points benchmark interest rate intervention The Board of the Central Bank at its meeting today decided to increase by 25 basis points its benchmark interest rate. Thus, the base rate for auctions will be 4.5 percent. The decision was made taking into account: - In June, annual consumer inflation increased for the second consecutive month and stood at 3.23 percent. Since March, the average measures of core inflation have seen a slight upward trend in June and reached a level close to the midpoint of the target range (3 percent + / - 1 percentage point). Inflation expectations at various horizons are also within that range. - The world economy continues to expand but at a slower rate than that observed before. The growth in advanced economies with high levels of debt shows weakness. In contrast, emerging economies, especially Asia, is still very strong. Consequently, international prices of commodities remain high. The terms of trade for commodity producing countries like Colombia are at historically high levels and contribute to the growth of national income. - In Colombia, GDP growth in the first quarter (5.1 percent) was higher than estimated by the technical team and the market average. Private demand was the most dynamic, especially the behavior of household consumption and investment other than civil works. Additionally, the consumption figures from around 2010 were revised upwards. - The recent information relating to economic activity, both in terms of supply and demand and consumer expectations and industry, indicate that GDP growth in the second quarter could be similar to that recorded at beginning of year . For the second half, the technical team expects economic activity to accelerate and therefore increased its growth forecast range to between 4.5 percent and 6.5 percent. - Credit growth continued to accelerate. All components, both those aimed at businesses as well as households, show real growth rates significantly higher than GDP growth. This situation occurs in a context where many real interest rates are at historically low levels. - In March, home prices continued to rise and approached closer their maximum level observed in 1995. The price index of new homes also increased in the first quarter. The increase in the benchmark rate aims to maintain inflation within the target range this year and next and help prevent future financial imbalances that threaten the sustained growth of the economy. The Board will continue careful monitoring of the international situation, especially risks associated with managing debt problems in a good number of advanced economies, and projections on the behavior of inflation, growth, behavior of markets assets. IT reiterated that monetary policy will depend on new information.
Source: www.reuters.com
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