BOGOTA, Sept 2 (Reuters) - Colombia’s benchmark interest rate is now properly aligned with growth and inflation, after five-quarter-point increases in as many months, and does not need to be modified, Finance Minister Mauricio Cardenas said on Tuesday.
Cardenas is a member of the central bank’s seven-member monetary policy board, which meets at the end of each month to set the interest rate. The board raised the rate a one-quarter percentage point last Friday, increasing inter-bank borrowing costs to 4.5 percent.
“Basically the country has reached its objective of inflation of 3 percent and growth of around 5 percent, which is all that we wish for,” Cardenas told reporters.
“As far as the current interest rate remains in line with these objectives, then naturally we can say that we’re in stable conditions and that current conditions do not need to be modified,” he said.
President Juan Manuel Santos made an unusual call on Monday for the central bank’s seven-member monetary policy board to pause after raising the benchmark rate to 4.5 percent.
The government’s growth target for 2014 is 4.7 percent and inflation is expected to end the year close to the bank’s preferred level of 3 percent. Some board members have said falling oil revenue signals caution over growth that must be heeded.
Lower revenue from oil taxes and royalties could slow government spending and compound the growth-easing effect of interest rate increases, they argue. Oil output has fallen so far this year and the country is struggling to boost reserves. (Reporting by Nelson Bocanegra; Writing by Peter Murphy; Editing by Steve Orlofsky)