Bloomberg News

Colombia Heads for ‘Neutral’ Interest Rate, Echeverry Says

September 29, 2011

(Updates with Echeverry’s comments in second paragraph.)

Sept. 29 (Bloomberg) -- Colombia is heading toward a “neutral” interest-rate level and needs to take into account economic uncertainty in Europe at its central bank meeting tomorrow, Finance Minister Juan Carlos Echeverry said today.

“We will have a sensible policy. We have had a very conservative approach,” Echeverry said in an interview with Bloomberg Television in London. “We’re heading towards an interest rate that is kind of neutral.”

Colombia’s central bank unexpectedly kept its benchmark overnight rate unchanged at 4.5 percent in August for the first time in seven months on concern global market turmoil could spread to the Andean nation. Echeverry, one of the seven members of the board, said policy makers will “seriously” consider the European debt crisis and the situation in Greece during their vote tomorrow.

Inflation is “under check” at 3.2 percent, within the government’s 2 percent to 4 percent range and close to the target of 3 percent, Echeverry said today. He said Colombia won’t have any gasoline or consumer-price “shocks” as inflation is “behaving.”

Echeverry said he expects gross domestic product to rise 5.5 percent this year, after expanding 5 percent in the first half. The government wants to maintain 5 percent growth in 2012, though the 4.5 percent expected by analysts would be “OK,” he said. The increase in GDP will “depend strongly on what happens abroad,” he said.

Ideal Peso Level

Colombia’s peso has fallen 7 percent against the U.S. dollar since the end of July, as investors dumped emerging market assets on signs the world recovery was faltering. The peso was previously overvalued and is now at an ideal level after the recent “correction,” Echeverry said.

The peso rose 0.2 percent to 1,913.33 to the dollar at 12:04 p.m. New York time.

“I like it a lot,” he said of the current exchange rate.

--With assistance from Karen Eeuwens in London. Editor: Robert Jameson

To contact the reporters on this story: Marta Marino in London at mmarino4@bloomberg.net; Laura Price in London at lprice3@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net


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