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Colombia’s central bank holds key lending rate at 4.25%

BOGOTA (Reuters) – Colombia’s central bank on Friday unanimously held its benchmark interest rate at 4.25% yet again, a rate the bank chief said could remain in place for a “relatively long period” as inflation and growth risks diminish.

Consumer prices have been well above the bank’s 3% target since March, but the seven-member board has kept lending rates unchanged since last year in a bid to stimulate economic growth, which the bank predicts will end 2019 at 3.2%.

The decision met the predictions of all analysts in a Reuters survey last week. Those polled expect the board to hold the rate throughout 2020.

“What we are seeing is a relatively long period of relatively stable rates,” bank chief Juan Jose Echavarria told journalists. “My best prediction is that we could hold rates for an additional time.”

The board last moved the rate in April 2018.

“Supply shocks that have affected inflation are expected to begin to subside and in early 2020 inflation will resume its convergence to the target, as reflected in market expectations,” the board said in a statement, adding deviations from the target are “transitory.”

Analysts predict inflation will close 2019 at 3.8%.

There remained uncertainty about the persistence of the depreciation of the peso currency, the statement added, and its “pass-through to domestic prices.”

The peso has fallen 3.3% against the dollar so far in 2019.

The stable interest rate has benefited Latin America’s fourth-largest economy. Growth of above 3% this year would make the country one of the region’s best performers economically.

The government, analysts and the International Monetary Fund predict the Andean country will also grow above 3% next year.

(Reporting by Carlos Vargas, Oliver Griffin and Nelson Bocanegra, Writing by Julia Symmes Cobb; editing by Diane Craft and Alistair Bell)


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