UPDATE 2-Colombia cenbank holds key rate as economy improves
* Cenbank sees higher GDP growth in second half
* Bank extends dollar purchases through first half
* Economic indicators suggest strong Q4 household spending
By Helen Murphy and Nelson Bocanegra
BOGOTA, Dec 20 (Reuters) - Colombia's central bank held its benchmark lending rate steady at 3.25 percent for a ninth straight month as expected on Friday after a pick up in economic growth on strong consumer spending and as inflation remains at a six-decade low.
The seven-member board will probably hold off making any directional decisions until the first few months of next year to gauge how the 200 basis points shaved from lending rates between July and March impact full year economic growth.
"The tone of the statement was favorable," said Marisol Torres, an analyst at Helm Bank, regarding the bank's outlook on growth.
"Inflation is low, but it's not a reason to put a brake on the central bank's moves next year," added Torres, who expects a quarter-point rate hike in March next year.
The economy grew a faster-than-expected 5.1 percent in the third quarter, beating forecasts of all but two of 31 analysts in a Reuters poll. The market had seen annual growth of 4.37 percent in the quarter.
The bank also unexpectedly extended its dollar purchase program into next year, buying up to $1 billion through the first quarter to accumulate international reserves. It has about $43.6 billion in reserves.
"Economic growth in the second half will be considerably higher than that observed in the first," the bank said in a statement after revealing the unanimous rate decision.
"Economic growth in 2013 is expected to be similar to that observed in the previous year. Interest rates remain at levels that stimulate aggregate spending in the economy," the bank added.
Output has been patchy, with the central bank and government taking measures to stimulate flagging growth and to encourage spending.
While third quarter data was strong, the government revised down the second quarter to 3.9 percent from 4.2 percent and economists caution that the economy would need to expand about 6 percent in the fourth quarter to meet the government's growth target of 4.5 percent for full year 2013.
The economy expanded 4.2 percent last year, way below the 6.6 percent seen in 2011. Finance Minister Mauricio Cardenas expects GDP to end next year at about 4.7 percent.
Bank Chief Jose Dario Uribe would not be pinned down on an estimate for the fourth quarter expansion, saying instead it could be above or below 5.1 percent.
"For the fourth quarter of 2013, indicators for consumer confidence, economic expectations, retail sales and automobile sales, suggest that household consumption is growing at a good pace," bank statement said.
Before Thursday's GDP data, economists had seen the possibility of a rate cut. The minutes of the last policy meeting showed that some of the board had said there may be room for additional measures if inflation drops further and the economy did not improve.
"It's important to keep monitoring economic indicators because any slight change could alter the entire scene for next year," said Daniel Lozano, economist at Bogota-based brokerage Serfinco before the announcement.
Low consumer prices gave the bank room to stick to an expansive interest rate during its last meeting of the year, but policymakers have raised concerns over inflation and said they want a faster rate than the current 1.76 percent.
Consumer prices are at their lowest since the 1950s and below the lower rung of the 2 percent to 4 percent target range seen as ideal by the bank.
"With inflation under the bank's goal range the bank is comfortable holding the interest rate stable for some time more, at least until March," said Daniel Velandia, chief economist at Credicorp Capital in Colombia.
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