UPDATE 3-Colombia cuts rates again, some policymakers wanted more
* Independent board faced government pressure for rate cut
* Bank sees GDP growth between 2.5 pct and 4.5 pct in 2013
* Economy growing below potential
By Helen Murphy and Nelson Bocanegra
BOGOTA, Jan 28 (Reuters) - Colombia cut its key lending rate a quarter point for a third straight month to protect the economy from a global slowdown and some policymakers called for a steeper reduction in a sign further easing may be ahead.
Colombia's central bank board reduced its overnight lending rate by 25 basis points to 4 percent in a widely expected move after weakness in the industrial and export sectors sparked concern the economy was stalling. Strong capital inflows have boosted the value of the peso against the dollar and hurt manufacturers and exporters.
The bank said it saw little risk in cutting its benchmark interest rate to its lowest level since May 2011.
"The Colombian economy is growing below its potential, observed and projected inflation are falling below the target of 3 percent, and there is no looming upward pressure on it in the near future," the bank said in a statement after its decision.
With the split in the board over the size of the cut, some analysts saw a further rate cut in February.
"The characteristics of the economy haven't changed and with inflation expectations stagnant below target, it's clear the government wants more monetary stimulus ... I'm expecting another rate cut in February" said Pedro Tuesta, U.S.-based head of strategy for Latin America at 4Cast Inc consultancy.
A Reuters poll last week found all but one of 34 economists had expected the bank to cut the rate on Monday.
Bank chief Jose Dario Uribe said the decision was not unanimous as some board members wanted a bigger reduction.
"The decision to lower rates was unanimous," Uribe told reporters. "But some wanted to lower rates and some wanted to lower more."
While the central bank is independent under the constitution, the government pressured for a rate cut more than usual in recent days. President Juan Manuel Santos last week said he would "ask the board to continue lowering interest rates."
DOLLAR BUYING PROGRAM
In a bid to ease gains in the currency, the bank also stepped up its daily dollar purchases to at least $30 million between February and May from $20 million or more now. The bank will spend at least $3 billion.
The new intervention level replaces a program that was set to run through March.
In some ways, Colombia is the victim of its own success as improved security over the last decade opened up many parts of the country to more investment especially in oil and mining whose dollar inflows are a key reason for the peso's gains.
"I think you start to see more aggressive if not heterodox policy responses if the current strategy of buying $30 million day doesn't work," said Bret Rosen, senior Latin America strategist for Standard Chartered in New York.
"But that is a last resort. Perhaps if we break 1,750 or lower do they start to think that way."
The peso closed on Monday 1,779.75 per dollar.
Citing economic models, Finance Minister Mauricio Cardenas said that equilibrium for the peso was about 8 percent weaker than the current rate.
Exporters and manufacturers have complained that their industries are being hobbled by the rising currency. A lower interest rate attracts fewer dollars to Colombia, reducing pressure on the peso.
The strong peso, which gained almost 9 percent last year, hurts Colombia's exporters and manufacturers because they earn in dollars but pay costs in pesos. They are also being hit by weak international and domestic demand.
Feeble third quarter numbers in construction, mining and civil works set off alarms that the global crisis had hit Colombia harder than previously thought and was damaging the nation's economic drivers.
The government announced measures last week to help manufacturing as declines in the sector in six of the eleven reported months last year sparked concern factories could consider layoffs just as the jobless rate is falling.
In November, industrial output fell 4.1 percent compared with a year earlier when it rose 5 percent.
Given the weak economic numbers, the government has revised down its GDP forecast for last year to 4 percent from an earlier prediction of 4.8 percent.
The bank said the rate cut was aimed at getting the economy back to near its productive capacity this year, without jeopardizing the bank's inflation target or the country's macroeconomic stability.
The monetary authority estimated an economic expansion this year of between 2.5 percent and 4.5 percent with likely growth of around 4 percent.
Uribe has repeatedly said the bank's main responsibility is to keep inflation under control and prevent bank lending from encouraging too much household debt.
Inflation last year reached 2.44 percent, comfortably within the bank's target range of 2 percent to 4 percent.
"A good part of monetary policy decisions are based on how inflation looks for this year and the minutes of the last meeting are clear that it's below what the bank was expecting," said Andres Langebaek, an economist at financial entity Grupo Bolivar in Bogota.