By CentralBankNews.info
Colombia’s central bank raised its policy rate for the ninth month in a row but underlined that inflation has been pushed up by temporary shocks and its monetary policy is aimed at ensuring that inflation converges towards its target.
The Central Bank of Colombia raised its policy rate by a further 25 basis points to 7.25 percent and has now raised it by 275 points since September last year. This year it has raised it by 150 points.
“It affirms the commitment to control inflation and its expectations, recognizing that the increase in inflation is of a transitory nature,” the central bank said.
Colombia’s consumer price inflation rate eased slightly to 7.93 percent in April from 7.98 percent in March but core inflation rose further to 6.69 percent from 6.48 percent. The slight decline in headline inflation was mainly due to lower energy prices, the central bank said.
High food prices and the transfer of a depreciation of the peso’s exchange rate continue to exert upward pressure on inflation. Although the intensity of the El Nino weather and the magnitude of the peso’s devaluation are temporary, it has raised inflation expectations, it added.
Inflation expectations by analysts one to two years ahead are 4.5 percent and 3.7 percent.
The rise in oil prices to above-expectations means that the fall in Colombia’s terms of trade and national income will be lower than expected, but central bank staff still forecast economic growth this year of 2.5 percent in the first quarter and throughout the year, within a range of 1.5 to 3.2 percent.
Last month the central bank lowered its growth forecast for this year to 2.5 percent from 2.7 percent.
Colombia’s peso declined sharply from mid-2014, in synch with the fall in crude oil prices, until February this year. It then appreciated from mid-February through April but has then eased again this month.
The peso was trading at 3,069.5 to the U.S. dollar today, up 3.4 percent so far this year but still down 22.5 percent since the start of 2015.