Press Note 01

Colombia Raises Key Rate a Quarter Point to Seven-Year High

Jose Ignacio Carrasquero Pinto

201614528

Introduccin a las Finanzas

Grupo #2
Universidad de La Sabana
Cundinamarca - Colombia

Febrero 02 de 2016

Central Bank raised Interest Rate by the accelerated Inflation

In order to understand why the Colombian Central Bank raised the Interest rate, we need
first to understand why the inflation has being raised faster since 2009. In my opinion

Vocabulario
1. Inflation: (Inflacin), se le llama inflacin al incremento sostenido y generalizado
del nivel de precios de bienes y servicios en un periodo determinado.
2. Deficit: (dficit), se le llama a la situacin econmica donde los egresos superan
los ingresos.
3. Interest Rate: (tasa de inters), es un monto de dinero que normalmente
corresponde a un porcentaje de la operacin de dinero que se est realizando.

Este es el artculo desde Bloomberg

Colombia Raises Key Rate a Quarter Point to Seven-Year High
2016-01-29 18:51:47.991 GMT

By Oscar Medina
(Bloomberg) -- Colombias central bank raised its benchmark
interest rate by a quarter point after inflation accelerated to
the fastest pace since 2009 and falling exports widened the
current account deficit.
The seven-member board increased the policy rate to 6
percent, the highest in seven years, bank Governor Jose Dario
Uribe told reporters Friday after the meeting. The decision was
forecast by 34 of 37 analysts surveyed by Bloomberg, with one
predicting a half-point increase and two forecasting no change.
The bank has been extremely clear about keeping to a path
of interest-rate increases in the short term, Juan David Ballen
a fixed income strategist at Casa de Bolsa, said before the
decision. Inflation has accelerated in a more aggressive way
than the bank has increased rates.
Policy makers have increased the key rate by 1.5 percentage
points since September after inflation exceeded the target range
and then soared to a six-year high at the end of December. The
central bank will probably lift rates to at least 6.5 percent in
the next two months, Ballen said. Consumer prices rose 6.77
percent last year as dry weather caused by the El Nino weather
phenomenon pushed up food costs and the weaker peso pressured
import prices.
According to the most recent central bank survey, analysts
expect inflation to end 2016 at 4.57 percent, above the 2
percent to 4 percent target range for a second year.
Finance Minister Mauricio Cardenas has said the country
also needs to curb spending after a slump in oil prices pushed
the current account deficit to about 6.5 percent of gross
domestic product last year. Uribe said in an interview earlier
this month that the bank wants to raise interest rates enough to
get inflation back to its 3 percent target, but without
triggering an over-adjustment in spending.
While economic growth has slowed, GDP will expand about 2.8
percent this year, outperforming most of major Latin American
economies, according analysts surveyed by Bloomberg. Peru will
expand 3.5 percent, Chile 2.3 percent while Brazil will contract
2.5 percent, the analysts predict.
The Colombian peso dropped to record low this week touching
3424.28 per U.S. dollar. Over the past 12 months, the currency
has fallen 27 percent the most in emerging markets after the
Brazilian real, the Argentine peso and the South African rand.
To contact the reporter on this story:
Oscar Medina in Bogota at omedinacruz@bloomberg.net
To contact the editors responsible for this story:
Giulia Camillo at gcamillo@bloomberg.net
Philip Sanders