Central Bank of Colombia Holds Interest Rate at 4.75%

The Central Bank of Colombia held its monetary policy interest rate unchanged at 4.75%.  The Bank said [translated]: "the main risk to inflation coming from excessive expansion in demand or increases in cost overruns, with strong and lasting effects on expectations and credibility of monetary policy. In a longer time horizon, excessive credit growth and continued low interest rates could be a source of financial imbalances have negative consequences on the sustainability of economic growth. In accordance with this assessment of the balance of these risks, Board decided to keep interest rates unchanged."

The Central Bank of Colombia hiked the rate 25 basis points at its last meeting, while its previous change was an increase of the interest rate by 25 basis points to 4.50% at its July monetary policy meeting this year, following a 25bp increase in June.  Colombia reported annual inflation of 3.96% in November, compared to 3.73% in September, 3.27% in August, 3.42% in July, 3.23% in June, 3.02% in May, and 2.84% in April; which compares to the Bank's inflation target of 3% (+/- 1%).  Goldman Sachs had previously forecast 2011 GDP growth at 5.5%, while Morgan Stanley had forecast just 4.9% growth for the Colombian economy.  

Colombia reported annual GDP growth of 4.8% in the June quarter and 5.1% in the March quarter, while the bank said the 2011 full year forecast of 4.5% - 6.5% is highly probable.  The Colombian peso (COP) has weakened about 1% against the US dollar so far this year, while the USDCOP exchange rate last traded around 1,950.5

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