Colombia’s Central Bank kept its benchmark interest rate unchanged at a record low for a fourth month after government calls to ease gains in the peso.
The seven-member board maintained the interbank rate at 3%, matching the forecasts of 21 of 23 economists surveyed by Bloomberg. Two economists expected a cut to 2.5%. Today’s meeting was the first to include Finance Minister Juan Carlos Echeverry, who took office with President Juan Manuel Santos on August 7.
“Actual inflation and expectations remain benign, even as growth is beginning to recover faster than originally anticipated,” Bank of America Corp. said in a report today. “However, the bank should be concerned with real rates turning negative, so we expect the first hike in the fourth quarter.”
Santos said last week he would seek to persuade policy makers to be “more creative, more bold” in stemming gains in the currency, which has strengthened 12% this year, making the country’s exports more expensive in dollar terms.
Santos’ comments echo those of his predecessor, Alvaro Uribe, who worried investors by repeatedly asking the independent Central Bank to take measures to weaken the country’s currency and help factories preserve jobs. A stronger peso makes Colombian exports more expensive in dollar terms.
With growth in the $231 billion economy accelerating and annual inflation near the bottom of the central bank’s 2% to 4% target range, the board can turn its attention to the peso, the best performing currency tracked by Bloomberg this year.
Annual inflation was 2.24% in July as consumer prices fell 0.04% from the previous month.
