Friday, October 26, 2012

Colombia holds rate, economy growing, inflation on target

    Colombia's central bank kept its benchmark intervention rate unchanged at 4.75 percent, as expected, with the economy continuing to expand and inflation very close to the midpoint of the central bank's target range.
    Banco de la Republica said the global economy remains weak, but the slowdown in some of the larger emerging economies appears to be stabilizing and it expects interest rates in other countries to be kept low for an extended period.
    The Colombian central bank has cut rates twice this year, in July and August, after raising rates in January and February, leaving rates at their end-2011 level.
    The weak global economy has been reflected in Colombia's exports and industrial output, but the central bank expects the economic expansion to continue in coming quarters, driven by domestic demand as households remain confident,  the labor market strong and the financial system healthy.
    "However, the uncertainty associated with the problems of public finances and banks in some advanced economies remains high," the bank said, adding:
    "The biggest threat to the country's economic activity continues to be a severe recession in Europe."

    The bank noted that international financial conditions had improved, helped by policy action at some of the world's major central banks, and the probability of a worsening of Europe's situation has decreased.
    Colombia's inflation rate stabilized in September at 3.1 percent. The central bank targets inflation of 3.0 percent within a one percentage point range.
    Colombia's Gross Domestic Product expanded by an annual rate of 4.9 percent in the second quarter, boosted by a quarterly rise of 6.4 in domestic demand, up from overall annual growth of 4.8 percent in the first quarter.
    The central bank made no reference to the exchange rate in its statement, apart from saying it had the tools and resources to meet liquidity needs. Last month the central bank said it would buy foreign currency worth $3 billion through daily auctions of at least $20 million between Oct. 1 and March, 29, 2013.


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