Colombia central banker sees rate steady, reaching neutral zone
By Carlos Vargas
CARTAGENA Oct 8 (Reuters) - Colombia's benchmark interest rate is approaching a neutral level and there is little reason to alter it, central bank board member Carlos Gustavo Cano said on Wednesday, adding there is room to cut the rate again if necessary.
The board held the rate steady at 4.5 percent for a second month in September, leaving behind a period of monetary tightening to ward off inflationary pressure that followed strong economic growth in the first quarter.
"To make an additional adjustment in the short term would be imprudent. I don't see reasons for that," Cano told reporters at a business conference in Cartagena. "There're no reasons to think differently from maintaining the rate at its current 4.5 percent, hopefully for the longest time possible.
"In my personal opinion we're now in the normalization zone of neutrality in the rate," said Cano. "If it becomes necessary to return to an expansionary phase, we have room."
He stressed that under current circumstances there are no reasons to cut the rate. A neutral interest rate is one that does not affect the economy, as it occurs when growth is at its potential and inflation is on target.
The bank began a tightening cycle in April, lifting the rate from 3.25 percent, where it had remained for 11 months to bolster the $370 billion economy.
Colombia's economy expanded less than expected in the second quarter, slowing to 4.3 percent and shrinking compared with the first three months of the year. First quarter expansion was an unexpectedly fast 6.5 percent.
Gross domestic product will likely grow by 4.8 to 5 percent in 2014, Cano said. Continuación...