Colombia central banker favors one more interest rate rise

BOGOTA Tue Aug 19, 2014 1:31pm EDT

Related Topics

BOGOTA Aug 19 (Reuters) - A Colombian central bank board member said in a newspaper interview published on Tuesday he leaned toward raising interest rates one more time in the bank's latest monetary tightening campaign.

Carlos Gustavo Cano, one of the board's seven members, told El Tiempo that he favored another interest rate rise on top of a cumulative 1 percentage point increase made over the board's last four monthly meetings in a bid to avert inflationary pressures stemming from faster economic growth.

"If (the board meeting) was today, I would be very inclined to make a last adjustment," he told the newspaper. "With one more adjustment, we would be entering the normalization range."

Colombia's benchmark lending rate is 4.25 percent and the bank's board holds its next rate-setting meeting on Aug. 29.

Cano told El Tiempo the board was discussing how close the benchmark interest rate is to being at a "neutral" rate, which would neither stimulate nor slow down economic growth.

"The fact that we have started to discuss that (the neutral rate), means that we are very close," he told the newspaper.

He added: "My personal opinion is that the economy is growing close to potential but not above that. That is a reason to reach normality in the level of interest rates."

In an interview with Reuters last week, Cano said he saw no reason for the central bank to interrupt its movement towards a neutral monetary policy stance.

"If one makes pauses, the great risk is that you have to make bigger jumps later on, and that generates more volatility and uncertainty in the markets," he said.

The minutes of its July meeting showed that its decision then to raise the interest rate by a further quarter percentage point was reached by a 6 to 1 majority, the first time in the last four months that the board's unanimity has been broken. (Reporting by Nelson Bocanegra, Writing by Peter Murphy, Editing by W Simon)

FILED UNDER: