Intervention to stem Colombia's rising inflation and the precipitous fall in the peso currency is unnecessary, central bank board member Adolfo Meisel said on Wednesday, because both reflect transitory pressures. Meisel, one of seven members of the central bank's policy-setting board, said that although inflation will be above the bank's 2 to 4 percent target range this year, he expects it will close 2016 at between 3 and 4 percent.
The peso has depreciated 65.3 percent in the last 12 months. "For there to be intervention in the exchange rate there would have to be liquidity problems in the foreign exchange market or speculation, which we aren't seeing at this moment," Meisel told Reuters in an interview at his office in Bogota.
"So long as much of this is temporary, prices correct themselves, the devaluation is just this once, we will not have to take measures," Meisel added. The currency continues to reach record lows; it closed at 3,261.60 pesos to the dollar on Wednesday. Analysts say the effect of continued depreciation on inflation may hasten hikes in the benchmark interest rate, which policymakers have held steady for 12 straight months. A weak currency compared with the dollar is key to controlling Colombia's widening current account deficit, Meisel said. Growth outlooks for Latin America's fourth-largest economy have been curbed by falling oil revenue and accelerating inflation, which reached 4.46 percent in the 12 months to July.