Colombia cuts rate 50 bps, inflation seen below target

    Colombia's central bank cut its benchmark intervention rate for the seventh time since last July, saying the country's economy is expected to continue to operate below its potential in coming quarters and inflation is forecast to remain below the banks' 3.0 percent target.
    Banco de la Republic Colombia, which has cut rates by 200 basis points since it embarked on its easing cycle in July 2012, added that its rate cuts appeared to be transmitted to the economy slower than it would have desired.
    The intervention rate was cut by 50 basis points to 3.25 percent, a move that was expected.
    Colombia's economy expanded by 4.0 percent last year, down from 2011's revised 6.6 percent, with the slowdown hitting hard in the second half of the year due to a sharp drop in investments. Last year's economic growth was slightly above the central bank's forecast of 3.3-3.9 percent.
    "For the first quarter of 2013, the deterioration in business expectations and the fall in the index of consumer confidence and auto sales suggest a less dynamic private consumption," the central bank said, adding that the country's industry was continuing to contract.
    Colombia's inflation rate fell to 1.83 percent in February from 2.0 percent in January, its lowest level in almost 60 years, and below the bank's target range of 2-4 percent.

    "The recent decline in international prices of energy and other commodities means less pressure on inflation," the bank said.
    It added that credit to households continues to slow down but is still expanding at a rate that is above nominal GDP growth. A slowdown in the leverage of firms and households is reducing the risk of financial excess during the current expansionary phase of monetary policy, it added.

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