Central Banker Says Colombia Isn’t Considering FX Intervention

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Colombia’s central bank isn’t discussing taking measures to ease declines in the peso, even as the currency hit a record-low earlier this week, according to one member of the monetary policy committee.

The peso has plunged 7.5% in the past three months, making it the worst performing emerging market currency after the Argentine peso, amid slowing global growth, weak oil and coal prices and investor concern over the nation’s wide current account deficit. On Wednesday, it surpassed the high end of the 3,300 to 3,500 range that central bank Governor Juan Jose Echavarria has deemed “comfortable.”

What would be worrying is if the currency’s depreciation is passed through to consumer prices, but there is no sign that is happening in a significant way, central bank co-director Jose Antonio Ocampo said.

“No exchange rate intervention measures are being discussed within the board,“ Ocampo said in an interview. So far, “we haven’t seen an inflationary effect, which doesn’t necessarily mean there won’t be one.”

Ocampo’s comments echo that of Finance Minister Alberto Carrasquilla who said Wednesday that the nation’s monetary authorities must be ready to act if there are signs of pass-through. Carrasquilla presides over the central bank’s board.

In August, annual inflation slowed for the first time in six months to 3.75%, easing concern that consumer prices would exceed the upper limit of the 2% to 4% target range. Despite the currency’s drop, tradable goods inflation stands at just 1.5%. The annual inflation rate , which is slated to be published this Saturday, is forecast to remain little changed at 3.76%.

The pass-through in Colombia is generally very low, Ocampo said, adding that one of the reasons why the peso’s drop hasn’t translated to inflation is that importers might be slashing prices to compete with local producers.

For now, investors at least don’t need to worry about the central bank returning to its international reserve accumulation program, which was halted in May on concern it was pressuring the currency lower.

To contact the reporter on this story: Oscar Medina in Bogota at omedinacruz@bloomberg.net

To contact the editors responsible for this story: Andrea Jaramillo at ajaramillo1@bloomberg.net, ;Matthew Bristow at mbristow5@bloomberg.net, Robert Jameson

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