Nov 23 (Reuters) - Colombia's central bank cut its benchmark interest rate on Friday in a surprise move.
Following is a translation of the text of the announcement published on the central bank's website: (http://www.banrep.gov.co/)
The Board of the Central Bank in its meeting today confirms its commitment to the inflation target of 3 percent and reiterated that monetary policy actions continue targeting inflation to remain at that value. Low and stable inflation is the best contribution monetary policy can make to sustainable economic growth and employment. The 3 percent inflation also applied for legal purposes and the target range is 3 percent + / - 1 percentage point.
On the other hand, the bank decided to cut its benchmark interest rate by 25 basis points. Thus the base rate for repo auctions is 4.5 percent. The decision was made taking into account:
International uncertainty remains. Some international economic indicators have improved slightly. The weakness of a number of industrialized economies and the lack of inflationary pressures expected to allow foreign interest rates remain low for an extended period.
Colombian growth has slowed from rates observed above trend levels in the second half of 2011. After annual growth of 4.8 percent in the first half of 2012, recent indicators suggest activity moderating growth slightly higher than expected. The weakness of the global economy and the decline in domestic demand has been reflected in lower export growth and contraction in industrial production. The range of GDP growth forecast for 2012 is between 3.7 percent and 4.9 percent, with 4.3 percent as the most likely.
For 2013 is expected to moderate but sustained growth in external demand for Colombian products, stable levels of international prices and ample global liquidity conditions. The reduction of interest rates in recent months, including the one held today, the job security and favorable confidence levels of households, would underpin a recovery in consumption growth over the second half of 2012. The investment would continue to be driven by civil works, lower interest rates and the expansion of mining and energy projects. Thus, growth is expected in 2013 near the growth of productive capacity.
Credit growth continues to slow. The price indices of new and used housing are at historically high levels. Inflation, average core inflation indicators and expectations are very close to the midpoint of the target range (3 percent). The major risks to economic activity in the country in 2013 remain a significant recession in Europe and the possibility of the occurrence of a strong tax cut in the United States.
According to the evaluation of the current balance of risks, the Board considered it appropriate to reduce the benchmark interest rate to 4.5 percent. With the current information, this is the level of interest rate consistent with growth close to capacity and meeting the inflation target.
The Board reiterates that the Central Bank has the tools and resources to meet the liquidity needs of local and foreign currency that the economy regularly requires and those that could occur in an environment of international financial turbulence.
The Board will continue To carefully monitor the performance and projections of economic activity and inflation in the country, asset markets and the international situation. Finally, it reiterated that monetary policy will depend new information.
(Editing by Andrew Hay)
Keywords: COLOMBIA RATES/TEXT
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