Colombia May Keep Key 3.25% Rate for ‘Some Time,’ Meisel Says
After cutting borrowing costs by 2 percentage points in the nine months through March to support the economy, policy makers on Sept. 27 unanimously voted to keep the benchmark rate unchanged. The decision followed faster-than-expected growth in the second quarter and after some policy makers voted for a cut in August, arguing that Colombia was growing less than its potential.
“There are good prospects that the second half will be better than the first, that we will continue to have more favorable growth,” Meisel said in an interview yesterday in Barranquilla. The interest rate is expansive, he said “if circumstances don’t change too much, one would think that this level can be kept for some time.”
The economy grew 4.2 percent in the second quarter and 2.7 percent in the first three months of the year, the national statistics agency reported Sept. 19. Second-quarter growth exceeded the forecasts of all 31 analysts surveyed by Bloomberg.
Colombia will grow around 4 percent this year, Meisel said. Inflation is anchored and “isn’t a concern,” he said.
Annual inflation quickened to 2.27 percent in August from a year earlier after the rate in February dropped to 1.83 percent, its lowest level since the 1950s. Colombia targets inflation of 3 percent, plus or minus one percentage point.
Banco de la Republica also announced in last week’s meeting that it will dial back its dollar purchase program from at least $2.5 billion in June to September to no more than $1 billion from October to December.
The peso, which has weakened 3.2 percent in the past six months, was little changed at 1,887.94 per U.S. dollar yesterday.
“There probably is some margin” for the peso to weaken further, Meisel said.
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