BOGOTA, April 14 (Reuters) - Colombia should hold its key interest rate steady at 4.5 percent at least until the end of the year despite slowing growth as inflation remains at the forefront of monetary policymakers’ minds, central bank co-director Carlos Gustavo Cano said.
The central bank’s official growth forecast is 3.6 percent this year but Cano said his personal view is that Colombia will grow “probably closer to 3 percent than 3.5 percent,” slowing from 4.6 percent in 2014 due to plunging prices for oil, a mainstay of the economy.
“In spite of the deceleration in the economy and the re-opening of the output gap into negative territory, the bank’s interest rate should be left unchanged at least for the rest of the year,” Cano said in a presentation to Pepsico Colombia on Monday that was later posted on the central bank’s website.
“But that is as long as inflation expectations do not break away from the target, in which case it would be necessary to consider raising it,” he said. The bank has a target range for inflation of 2-4 percent, with 3 percent preferred.
Twelve-month inflation crept above the upper limit of that range in February and March but Cano said it was below 4 percent if the indicator’s most volatile component, food, is excluded from the calculation.
The central bank’s policymaking board, of which Cano is one of seven members, will meet on April 24 to decide whether to alter the bank’s benchmark rate, which it has held steady for seven straight months.
Cano said the external environment remains weak, consumer confidence levels fell in the three months through February, and sentiment among manufacturers is deteriorating, on top of a current account deficit that continues to deepen. (Reporting by Peter Murphy and Nelson Bocanegra; Editing by Peter Galloway)