Bloomberg News

Colombia Central Bank Minutes Show Split on Inflation Risks

May 11, 2012

Colombian policy makers are divided on inflation risks to the economy, with some seeing price pressures due to strong domestic demand, while others see price increases under control.

The seven-member board, led by central bank chief Jose Dario Uribe, on April 30 voted unanimously to keep the overnight rate unchanged at 5.25 percent, according to the minutes of the meeting posted on the central bank’s website today.

Banco de la Republica has kept borrowing costs on hold since its March meeting as inflation slows after nine rate increases in 13 months. Slowing economic activity will allow the bank to pause for the rest of this year, though policy makers may use other measures to tame credit growth, Francisco Rodriguez, an economist at Bank of America, said in a May 3 report.

Some directors see inflationary risks from public investment, consumer demand and falling unemployment, the minutes showed. Others note that given the lag in the effect of interest rate rises on demand and that inflation is within the target range, price pressures “have been contained by the measures already taken.”

The central bank raised rates in February to their highest in almost three years, bucking a global trend for lower rates, after a 22 percent expansion in credit helped power 5.9 percent growth in 2011, the fastest since 2007.


Consumer prices rose 0.14 percent in April, the national statistics agency said in a May 5 report, less than the 0.17 percent median estimate of 30 economists surveyed by Bloomberg. Annual inflation, which unexpectedly slowed to a seven-month low of 3.40 percent in March, was 3.43 percent in April.

Colombia’s inflation compares with 5.10 percent in Brazil, 3.5 percent in Chile and 3.4 percent in Mexico. The central bank targets price-growth of 2 percent to 4 percent.

Inflation will end this year at 3.29 percent, according to the median estimate in a central bank survey published April 12, down from a projected 3.45 percent in the March survey.

Policy makers also decided at the meeting to extend their daily dollar purchase program by three months at the current daily rate amid concern the peso’s 10 percent advance against the dollar in 2012 is hurting the nation’s manufacturers and farmers.

‘Diverse Set’

Finance Minister Juan Carlos Echeverry said in an April 13 interview that Colombia should use a “diverse set of instruments” to halt the gains in the peso to protect jobs.

Retail sales surged 9.4 percent in February from the year- ago period, boosted by the leap year, as industrial production increased 4.5 percent.

The bank board sees “the need to continue closely monitoring consumer credit,” which grew 22 percent in March from a year earlier and could stir inflation pressures, according to the minutes.

Total credit grew an annual 19.7 percent in March after expanding 20.4 percent in February, according to the minutes.

By comparison, outstanding credit in Brazil, Latin America’s biggest economy, rose 18 percent in March from a year earlier.

To contact the reporter on this story: John Quigley in Lima at

To contact the editor responsible for this story: Joshua Goodman at

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