- Central bank co-director Adolfo Meisel speaks in interview
- Maintaining GDP growth at 3% is bank's `biggest challenge'
Colombia’s tightening monetary policy shouldn’t push growth below 3 percent, central bank co-director Adolfo Meisel said, as the price of oil, the main country’s export, tumbles in global markets.
“Maintaining growth is the biggest challenge,” Meisel said Wednesday in an interview at his office in Bogota. “You don’t achieve 3 percent just through will-power.”
After raising the key rate by 1.25 percentage points to 5.75 percent since September, there is still room for further increases, Meisel said. Consumer prices rose 6.77 percent in 2015, the fastest pace in seven years, and inflation won’t start to slow until the second half of this year, he said.
“While that growth is maintained, there’s room to keep raising rates,” Meisel said. “There will probably be additional rate increases in the next few months.”
Inflation will start to ease later this year once the dry weather caused by the El Nino weather phenomenon disappears, ending the year at about 4.5 percent, Meisel said. It should fall to within the 2 percent to 4 percent target range by the end of next year, he said. Long-term inflation expectations have started to react to the monetary policy tightening, he added.
The economy will expand about 3 percent this year,, outperforming all major Latin American economies excluding Peru, Meisel forecast. Mexico will grow 2.8 percent, Chile 2.3 percent and Brazil will contract 2.5 percent, according analysts surveyed by Bloomberg.
Colombia’s peso is close to “its equilibrium level” and the current rate responds to fundamentals in the economy, including the oil price. The currency fell 2.5 percent on Wednesday to a record low of 3,400 pesos per dollar as oil price plummeted to the lowest in 13 years.
The current account deficit, which central bank board member Carlos Gustavo Cano has called the Achilles’ heel of the economy, is forecast to end 2016 between 6 percent and 7 percent of gross domestic product, Meisel said.