BOGOTÁ: Colombia’s central bank raised its policy rate for a fourth straight month as it seeks to curb spending growth and cool the fastest inflation in almost seven years.
The seven-member board voted to increase the policy a quarter percentage point to 5.75 percent, bank Governor Jose Dario Uribe told reporters in Bogota after Friday’s meeting. The decision, which was not unanimous, was forecast by 32 of 37 analysts surveyed by Bloomberg with two predicting a 50 basis-point increase and three forecasting no change.
Policy makers said that “greater-than-expected increases in food prices and additional weakening of the exchange rate, related in large part to the oil price drop, are putting new pressure on inflation,” according to the text of their statement. “At the same time, inflation expectations remain high and the risk of a deceleration of internal demand going over what would be consistent with the drop in national income, has moderated.”
The central bank is seeking to reduce demand growth and damp inflation expectations to reach its goal of getting inflation back down to 3 percent within the next two years. The economy grew at the fastest pace among major Latin economies in the third quarter, easing concern that the plunge in oil prices will cause too pronounced a slowdown. Finance Minister Mauricio Cardenas, who chairs central bank board meetings, said the rate increase sends a clear signal of the bank’s commitment to hitting its inflation target.
“The statement is very clear that we are on a path of tightening monetary policy,” Cardenas said. “Let there be no doubt or ambiguity that we are raising interest rates precisely so that inflation goes down.”
