Colombia’s Central Bank dropped the interest rate from 3.5% to a new record low base rate of 3%, reports El Espectador.
The rate had been set at 3.5% – then a record low – for four months, but, contrary to some expectations, the rate was lowered Friday.
The decision comes after consumer inflation fell 25 points on February’s figures, a significantly better result than was expected by the Banco de la Republica.
The indicators of core inflation (which exclude the prices of more volatile products like food) have continued to decline and have reached the bottom of the target range for long term inflation.
The new projections made by the Board of the Bank of the Republic predict that inflation will fall within the target range for 2010 and 2011, and the alignment of inflation with predictions lends credibility to Colombian monetary policy.
The information received in recent weeks suggests that the economy is recovering faster than expected, without generating inflationary pressures.
As a result of credit downgrades in Europe, the Colombian peso, which was expected to drop due to interest rates remaining the same, has recovered from depreciation. It closed at COP1,956.95 to the dollar Friday from COP1,959 on Thursday.
Colombian peso bonds have soared to a two-week high Thursday following favorable predictions from the central bank.
