Central Bank of Colombia Hikes Rate 25bps to 5.25%

The Central Bank of Colombia hiked its monetary policy interest rate another 25 basis points to 5.25% from 5.00%.  The Bank said [translated]: "The latest information suggests that in the fourth quarter of 2011 the Colombian economy continued to show strong momentum and that this performance has continued in early 2012. Both exports and imports of capital goods continued to grow at high rates in December. In the same month, the index of industrial confidence remained at high levels and retail sales grew at a good pace. In January, the index of consumer confidence rose for the third consecutive month and reached historically high levels. Credit growth remains high although recent data suggest a slight slowdown. However, the consumer credit behavior suggests that households have significantly higher level of indebtedness. With recent increases in interest rates intervention are expected to approximate market rates more quickly to their average historical levels."

The Central Bank of Colombia last hiked the rate 25 basis points at its January meeting this year, while its previous change was an increase of the interest rate by 25 basis points to 4.50% at its July monetary policy meeting, following a 25bp increase in June last year.  Colombia reported annual inflation of 3.6% in December, 3.96% in November, 3.73% in September, 3.27% in August, 3.42% in July, 3.23% in June, 3.02% in May, and 2.84% in April; which compares to the Bank's inflation target of 3% (+/- 1%).

Colombia reported a spike in annual GDP growth to 7.7% in the September quarter of 2011, compared to 4.8% in the June quarter and 5.1% in the March quarter, while the bank previously said the 2011 full year forecast of 4.5% - 6.5% is highly probable.  The Colombian peso (COP) has gained about 7% against the US dollar over the past year, while the USDCOP exchange rate last traded around 1,772

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