Colombia’s central bank held its policy intervention rate steady at 3.25 percent, saying interest rates were appropriate because they are stimulating spending while inflation is converging toward the bank’s 3.0 percent target.
The Central Bank of Colombia, which has held rates steady since April 2013 after cutting them by 100 basis points in the first three months of last year, said economic growth in 2014 is still projected to expand by 4.3 percent after likely growth of 4.1 percent in 2013 within a range of 3.7-4.3 percent.
For the fourth quarter, the central bank’s staff is projecting growth of 4.6 percent, up from 4.5 percent forecast by the central bank in January, the bank said after a meeting of its board on Friday.
Investment is increasing by the largest amount while household consumption is growing at its historical average rate. Exports are also accelerating but at a rate that is lower than imports.
Colombia’s Gross Domestic Product expanded by 1.10 percent in the third quarter from the second quarter for annual growth of 5.1 percent, the fastest rate in six quarters and up from 3.9 percent in the second quarter.
Colombia’s inflation rate rose to 2.13 percent in January, within the central bank’s 2.0 to 4.0 percent target range with core inflation at 2.55 percent. Inflation expectations one year from now are around 3.0 percent.
The central bank added that the rate of credit growth slowed in January but was still higher than the growth of nominal GDP.
Last month the central bank’s governor, Jose Dario Uribe, said inflation was likely to rise to between 2.5 and 3.0 percent this year after falling to 1.94 percent in 2013, helped by a depreciation in the peso against the U.S. dollar that is raising import prices.