Colombia Obliges with Rate Pause

In line with expectations, Colombia’s central bank has kept the policy rate unchanged at 9.25%, extending a pause started in August. Headline inflation continues to fall on the back of retreating food price inflation but the bank still sees risks on inflation and growth. “We expect the bank to leave the policy rate unchanged at least until end 2007,” says Goldman Sachs. “However, if the economy fails to decelerate convincingly from the strong above-trend pace of 1H2007 the central bank might have no option but to hike rates again in the near future in order to protect the 2008 inflation target,” it adds. The shop predicts the bank will set the 2008 inflation target at the same level of 2007: 4.0%, plus or minus 0.5%.