Colombia’s central bank wants to get inflation back up to the midpoint of its target range over a “prudent” period of time, Central Bank Governor Jose Dario Uribe said.
“What we want is monetary policy actions that, over a prudent amount of time, return inflation to 3 percent,” Uribe said today in an interview in Cali.
Uribe has cut borrowing costs six times since June, citing weaker domestic growth and slowing inflation. The effect of 1.5 percentage point of interest rate cuts over the last eight months will take time to affect growth, Uribe said.
Asked whether inflation at the lower end of its target range gives the central bank room to continue cutting borrowing costs, Uribe said, “monetary policy actions begin their transmission process immediately, but they affect economic variables over time, and don’t affect growth and prices immediately, so we need to take that into account.”
Consumer prices rose 2 percent in January from a year earlier, the slowest inflation in nearly three years. Colombia targets annual inflation of 3 percent, plus or minus one percentage point.
Policy makers cut interest rates a quarter point, to 3.75 percent, at their Feb. 22 policy meeting, saying that the economy is growing slower than its potential. The central bank forecasts growth of 2.5 percent to 4.5 percent this year, up from a forecast of 3.3 percent to 3.9 percent in 2012. Colombia has the lowest interest rates among major Latin American economies.
The suspension of three of Colombia’s coal complexes could have an impact on first quarter gross domestic product, depending on the duration of the shutdowns, Uribe said.
Workers began a strike Feb. 7 at the Cerrejon mine owned by BHP Billiton Plc, Xstrata Plc and Anglo American Plc. Drummond Inc.’s coal loading license was suspended from Feb. 6 to Feb. 28 after it dumped coal into the sea in January, while the operating contract at Goldman Sachs Group Inc.’s La Francia mine was terminated.
Yields on peso bonds due in 2024 fell two basis points, or 0.02 percentage point, to 4.99 percent, according to the central bank. The yields declined to 4.97 percent on Feb. 22, the lowest since the securities were issued in 2009.
The peso was virtually unchanged at 1,812.75 per U.S. dollar. It has weakened 2.5 percent this year, the biggest fall among major Latin American economies after the Venezuelan bolivar and the Argentine peso.