Central Banker Sees No Room for Colombia Interest Rate Cuts

(Bloomberg) --

Colombia has no leeway to join central banks around the world that are lowering interest rates to bolster growth, according to Ana Fernanda Maiguashca, a member of the central bank board.

“Our inflation outlook, while not alarming, just doesn’t give us much space to provide greater stimulus to the economy,” Maiguashca said in a telephone interview Thursday.

Central banks in the U.S., Brazil, Mexico and Indonesia have recently lowered borrowing costs amid concern about trade disputes, stock market volatility and a slowdown in global growth. Maiguashca said that in Colombia the current level of the key rate is helping buoy demand, and that policy makers don’t think the economy needs a bigger boost.

Annual inflation accelerated to 3.79% in July, the highest level in two years, amid the peso’s 13% decline over the last year and food supply shocks. Gross domestic product growth accelerated to 3% in the second quarter, slightly better than forecast by analysts surveyed by Bloomberg.

Inflation should start to converge to the central bank’s 3% target next year as food price shocks abate, Maiguashca said. Rising inflation expectations are not something to worry about, she said.

Consumer prices will rise 3.36% over the next 12-months, and inflation will remain above the target 2 years from now, according to the most recent central bank survey of analysts.

Analysts are also forecasting policy tightening in the first quarter of 2020.

Colombia’s key interest rate is currently at 4.25%, down from 7.75% at year-end 2016, with the last reduction coming in April 2018.

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

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

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