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BOGOTA (Reuters) - Colombia’s central bank is expected to hold its benchmark interest rate at 13.25% during the board’s meeting next week as inflation has been falling more slowly than expected, a Reuters poll revealed on Friday.
All 21 analysts surveyed forecast the bank would hold the rate stable as it has done since June, when the board ended a tightening cycle during which it hiked the benchmark interest rate by 1,150 basis points.
If the analysts are correct, it seems unlikely the board’s decision next week will be unanimous. Finance Minister Ricardo Bonilla - one of the seven board members - on Wednesday said he will push for rate cuts to begin.
Although inflation has slowed, the pace of decline has fallen in the last two months. Colombia’s 12-month inflation through August hit 11.43%, almost four times the bank’s 3% goal.
“There are still risks concerning inflation that require a more cautious strategy on the part of the (central bank)” said BNP Paribas economist for Latin America Felipe Klein.
In the poll 14 analysts forecast the first cut would take place in October. Four said it would happen in December, while the rest said no cuts would happen before the new year.
The board does not vote on the interest rate in November.
Analysts who do expect rate cuts this year suggest they will be less pronounced than previously forecast. According to the median, the rate is expected to finish this year at 12.5%, about 100 basis points higher than estimated in last month’s survey.
Colombia’s biggest business associations have urged the bank and the financial system to cut interest rates to boost economic growth. The central bank expects Colombia’s economy to expand 0.9% this year, far below last year’s 7.3% growth.
Reporting by Nelson Bocanegra; Writing by Oliver Griffin; Editing by David Gregorio
