Colombia cenbank head rules out intervening if peso falls

Posted by On 10:41 AM

Colombia cenbank head rules out intervening if peso falls

Reuters

LONDON, Sept 4 (Reuters) - Colombia has no plans to intervene in its currency markets even if the peso depreciates by 10-15 percent, central bank governor Juan Jose Echavarria told Reuters on Tuesday.

Like most emerging currencies, Colombia's peso has weakened this year as the dollar has strengthened amid steady rate rises by the U.S. Federal Reserve. But the peso's falls have been far less severe than peers in Argentina, Turkey, South Africa or Mexico.

"Absolutely not, even if we have a devaluation of 10 or 15 percent," he said in an interview. "10 percent (devaluation) is no problem at all."

Echavarria acknowledged that Colombia ranked high up on the list of countries suffering from a large current account deficit as a share of gross domestic product, together with peers Argentina, Turkey and South Africa that have come under increasing pressure recently. However, Colombia's trend had been in the right direction, he said.

"If you had a huge shock like Colombia had two or three years ago, you need to look at both - the level and the adjustment - two years ago it was 6.5 percent of GDP, now it is 3.2 percent."

The governor said he did not at this stage envisage raising interest rates either, even next year, but added that "a lot depends on the exchange rate".

A Reuters poll last week showed analysts expected the central bank to keep its benchmark interest rate unchanged at 4.25 percent at least until the first quarter of next year and predicted a rise to 4.75 percent by the end of 2019.

Asked if he shared the view of F inance Minister Alberto Carrasquilla - who took office at the beginning of August - that the fiscal outlook for Latin America's fourth-largest economy was worrying, Echavarria said the fiscal situation was "very manageable".

"It is a new government, and new governments always look carefully at the numbers," he said.

Echavarria also saw no reason for the U.S. Fed to be swayed in its policy decisions by the woes of emerging markets.

"They have to do their job, every country has to do their job. I don't think (Fed Chair Jerome) Powell will increase or decrease interest rates because of emerging markets. The best thing for emerging markets is that the Fed does what they need to do for inflation and growth."


This article appears in: Politics , Stocks , World Markets , EconomySource: Google News Colombia | Netizen 24 Colombia

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