BOGOTA, July 10 Colombia's current cycle of
interest rate increases may end with lower borrowing costs than
in previous periods, with the result that the central bank may
not have to raise rates as high as in other cycles, Carlos
Gustavo Cano, a member of the bank's board, said on Thursday.
Economists expect the bank to cease raising the benchmark
lending rate some time in the first half of next year, when it
reaches as high as 5.25 percent.
The central bank in April began its latest cycle of interest
rate increases, taking it to 4 percent over three months after
holding it steady at 3.25 percent for more than a year.
"Given evidence of a reduction in the natural or neutral
rate, the amount of adjustments needed to bring the central bank
interest rate to the normalization of monetary policy, could be
less than before," Cano said in a presentation published on the
central bank's website.
In monetary policy terms, a neutral interest rate is one
that does not affect the economy as it occurs when growth is at
potential and inflation is on target.
Cano's comments come as most analysts see the economy
growing at close to its 4.8 percent potential, making an
expansive monetary policy less necessary.
Cano, one of seven central bank board members, sees the
economy growing 4.7 percent this year, the same as in 2013.
In a recent survey by Reuters, economists expect the central
bank to raise the interest rate to as high as 4.75 percent this
(Reporting by Helen Murphy)