Colombia’s economy can grow at its full potential with the central bank’s policy rate at its current level, Finance Minister Mauricio Cardenas said.
“If everything stays the same, if conditions in the economy don’t change, we should be able to achieve our potential growth with this interest rate,” Cardenas told reporters in Bogota last night.
The central bank has cut its policy rate two percentage points to 3.25 percent since June, the lowest among major Latin American economies, as growth cooled and the inflation rate fell to a six-decade low. Cardenas, who chairs the central bank’s policy committee, has argued for a rate cut at every meeting since he became Finance Minister in September.
“No one knows what may happen next month, or what information could come out, so the central bank needs its autonomy to set rates as it sees fit,” Cardenas said. “But, based on the information we have today, the economy should be able to recover its full speed.”
Monetary policy “isn’t all powerful” and should also be supplemented by fiscal policy and regulatory policy, Cardenas said, without providing details. The economy expanded 3.1 percent in the fourth quarter from a year earlier, the slowest pace in the Andean region.
The Finance Ministry estimates that the economy can grow as fast as 4.8 percent per year without stoking inflation.
Inflation accelerated to 1.99 percent in March, according to the median forecast in a Bloomberg survey of 19 analysts, from a six decade-low of 1.83 percent in February. The statistics agency is scheduled to release the inflation figure on April 5.
The central bank targets inflation of 3 percent, plus or minus one percentage point.
Policy makers don’t want inflation that is “excessively low”, Cardenas said. “So long as inflation is between 2% and 4%, everyone is calm,” he said.