Colombia Keeps Interest Rates Steady Amid Low Inflation

BOGOTA--Colombia's central bank left its main interest rate on hold at a near-record low for an 11th straight month, as healthy economic growth combined with very mild inflation allowed it to continue providing monetary stimulus without concerns of a spike in consumer prices.

After its monthly meeting, the bank's seven-member board said it decided to keep its key lending rate at 3.25%, an outcome widely expected by economists in Bogota and on Wall Street.

"Annual inflation through January was 2.13%, which lands inside the target range" of 2% to 4%, Central Bank Chief Jose Dario Uribe told reporters. "Evaluating the balance of risks, the bank board decided it was appropriate to leave interest rates unchanged."

The bank also said it anticipates fourth-quarter economic growth was likely about 4.6% on year and that for all of 2013 the economy probably expanded by 4.1%, a figure similar to its earlier forecasts and close to what the bank considers is the country's "potential," or desired economic growth rate.

By sectors during the fourth quarter, the central bank said it expects investment, which would include spending on public works and other infrastructure, likely gave the economy the biggest boost. The mining sector likely decelerated and industrial production likely was almost flat, it said.

For this year, the bank said it expects growth between 3.3% and 5.3%, with 4.3% the most likely figure. Colombia Finance Minister Mauricio Cardenas, who is also a member of the bank board, said in a recent interview he expects growth this year to be 4.7%, adding that he thinks infrastructure spending will outpace most economists' expectations.

The central bank made no changes to its dollar-buying program, which aims to both weaken the peso further against the dollar and boost foreign reserves. The intervention policy allows the bank to buy up to about $15 million daily in the spot foreign exchange market, although it also has the option of buying less, or none at all. The bank has been recently buying about $10 million a day.

The peso is 7% weaker against the dollar this year after falling 12% in 2013, a move that has pleased the bank as it helps Colombian exporters. On Friday, the currency closed at COP2,047 for a dollar, 0.3% stronger from a day earlier.