Colombia keeps rate steady, continues to buy FX

By Central Bank News
    The central bank of Colombia kept its benchmark intervention rate unchanged at 4.75 percent, as expected by most economists, saying domestic demand was stronger-than-expected in the second quarter and inflation was close to the midpoint of the bank’s target range.
    Banco de la Republica Colombia also said it would buy a total of foreign currency worth $3 billion through daily auctions of at least $20 million between Oct. 1 and March, 29, 2013.
    “According to the evaluation of the current balance of risks, the Board considered it appropriate to maintain the interest rate at 4.75% intervention,” the central bank said in a statement.
    The central bank raised its policy rate in January and February by a total of 50 basis points, but then cut in July and August, leaving rates at the end-2011 level.
    Colombia’s economy expanded by 1.6 percent in the second quarter for an annual increase of 4.9 percent, exceeding the range estimated by the central bank’s technical team, as domestic demand grew a higher-than-expected 6.4 percent.
    Growth in the third quarter is likely to be lower than in the second quarter, but “for all of 2012, it is likely that economic growth is higher than the midpoint of the estimated range (between 3 and 5 percent),” the bank said.

    Inflation in Colombia rose slightly to an annual rate of 3.1 percent in August from 3.0 percent in July, in the midpoint of the central bank’s 2-4 percent target range.
    The bank said annual inflation expectations remained stable at 3.3 percent.
    After last month’s meeting by the bank’s policy-setting board, the bank said it would buy $700 million by the end of September to help keep down the peso, which rose strongly at the start of the year but has since been stabilized around 1,800 per U.S. dollar, up from 1,9300 in early January.

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