Colombia | BanRep holds monetary policy rate at 4.5% and awaits the impact of lower oil prices

Summary

During the last monetary policy meeting of the year, Colombia’s central bank board members decided unanimously to keep interest rates at 4.5%, as anticipated by BBVA Research. The decision was prompted by the global economic slowdown, deteriorating terms of trade that will reduce national income growth, a core inflation that remains below the central bank’s long term target, and well anchored inflation expectations. Furthermore, the central bank expressed a downward bias to its most likely GDP growth forecast for 2014 of 5.0% and that of 2016 of 4.3%. We expect the monetary pause to extend over 2015, but there is a risk of possible cuts in the first half of the year, depending on the impact of lower oil prices on local activity and inflation expectations.

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