colombia pauses rate hikes amid
Last Updated : GMT 04:32:38
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Colombia pauses rate hikes amid

Arab Today, arab today

Arab Today, arab today Colombia pauses rate hikes amid

Bogota - Arabstoday

Colombia\'s central bank paused its tightening cycle on Friday after six straight months of interest rate hikes, citing concerns over turbulence in global financial markets and its possible impact on economic growth. The bank held its benchmark interest rate steady at 4.50 per cent in a unanimous decision after dissenting votes at its past two policy meetings. The decision caught some analysts off guard after the bank raised growth forecasts for Colombia last month. Economists saw it as a temporary pause to gauge the effects of recent market turmoil. Many analysts expect the bank to resume rate increases in order to keep a lid on rising inflation in Latin America\'s fifth largest economy. \"They\'re talking about a pause, a pause is not a completion of the hikes, I believe that what they\'re doing is taking a breath and then they\'ll continue (with the increases),\" said Andres Pardo, head of economic research at Corficolombiana. Article continues below Prudent to halt Colombia was one of the last countries in Latin America to start upping rates and its central bank has faced pressure from the government to hold borrowing costs steady, as Chile and Peru have done. Still, the bank struck a pessimistic tone in its statement, saying inflation was rising above the mid-point of the central bank\'s 2 per cent to 4 per cent target. Nineteen of 35 economists polled by Reuters last week expected the bank to raise rates 25 basis points. The remaining 16 said the bank would hold rates. As fears grow the developed world is shifting from slow growth to stagnation, the bank said it was prudent to see what effect market turbulence might have on economic growth. \"The increased uncertainty in international financial markets and its possible effect on the growth of the global economy, that was a key element,\" Jose Dario Uribe, general manager of the central bank, told reporters, following the policy meeting. From the United States and Italy to Japan and Greece, slow growth is hobbling the capacity of governments to service their debts, spooking markets and sapping confidence and so further darkening the economic outlook. To many economists, high-growth emerging markets like Colombia appear better placed to weather the storm. Attractive assets Colombia has grappled with the dilemma of whether to raise rates to combat inflation. Higher rates have made their assets more attractive, stoked their domestic currencies and made exports less competitive. Chile, Peru, Brazil and Colombia have been intervening in a bid to tame their strong currencies but are struggling given a weak dollar abroad and high interest rate differentials with the US which attract capital inflows. Colombia\'s monetary authority did not mention on Friday any new measures to combat the strength of the peso currency, which has firmed 7.2 per cent so far this year. The bank\'s current intervention of purchasing a minimum of $20 million daily is set to expire on September 30 — the date of the board\'s next policy meeting. \"Definitely [the exchange rate] does not leave us calm [at the current level], and as we\'ve said, I would say, that all members of the bank\'s board would like to have a more depreciated exchange rate,\" Uribe said.  

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