Reflecting Latin America’s fastest growing economy, Colombia exchange traded funds have been outperforming. Now, the Colombian central bank has hiked its overnight lending rate for the fourth straight month to help prevent overheating.
Bank Governor Jose Dario Uribe announced that the central bank hiked rates by a quarter point to 4.25% Friday, Bloomberg reports.
In contrast, other Latin America countries, including Mexico, Chile, and Peru, have lowered borrowing costs in response to slowing growth rates.
Colombia’s central bank also upwardly revised the economy’s growth projection to 5% from 4.3%. The economy expanded 6.4% in the first quarter, its fastest pace in two years, on a surge in public works spending and recovery in coal and coffee. Due to the strong and positive growth forecasts, Colombia’s central bank feels it is given enough wiggle room to withdraw stimulus measures.
“Aggregate demand has maintained strong growth in the context of near full employment,” Uribe said in the article. “At the same time, inflation expectations are close, or slightly higher, than 3 percent.”
However, Colombian consumers were up 2.8% in June from a year earlier, the slowest among Latin America’s largest economies. The central bank, though, may still have room to push off further rate hikes as it has a 3% inflation target.
Global X FTSE Colombia 20 ETFColombia category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.