BOGOTA, April 30 (Reuters) – Colombia’s central bank board kept the benchmark interest rate at 1.75% for the seventh consecutive month in a majority decision on Friday, amid controlled inflation, and raised its 2021 economic growth projection.
The following is a Reuters translation of the statement accompanying the bank’s interest rate decision:
In its session today, the central bank’s board of directors decided by majority, in a vote of six votes to one, to maintain the policy rate at 1.75%. This decision was made taking into account the following considerations.
The (bank’s) technical team’s GDP growth forecast for 2021 was revised from 5.2% to 6% in the baseline scenario, taking into account the economy’s better-than-expected performance in the first quarter. However, the appearance of outbreaks of the pandemic, of uncertain intensity and duration, as well as the uncertainty on the fiscal front, could alter this projection.
Total annual inflation at the end of March was 1.51%, and inflation excluding food and regulated items was 0.94%. The technical team’s inflation forecast and market expectations are in line with inflation converging on the targeted 3% in 2021 and 2022.
The data revealed by (government statistics agency) DANE show a national unemployment rate of 14.2% in March, and a level of monetary poverty of 42.5% in 2020. High unemployment and the increase in poverty are phenomena that justify a historically low policy interest rate like the current one.
Although international financial conditions are becoming less favorable due to a historically broad fiscal policy in the United States, they remain loose.
If the fiscal adjustment required is not achieved, it could compromise access and increase the cost of public financing, which would limit monetary policy space to continue supporting economic recovery and employment.
Under these conditions and taking into account the balance of risks, the board decided to maintain the benchmark rate at 1.75% by a majority of six votes to one, with one vote to cut it by a further 25 basis points. (Compiled by Oliver Griffin)
