BOGOTA Jan 31 Colombia's central bank is
expected to hold its benchmark lending rate steady for a tenth
month on Friday allowing Latin America's lowest interest rate to
bolster economic growth and push up below-target inflation.
The seven-member policymaking board will maintain borrowing
costs at 3.25 percent - a Reuters survey of 25 analysts found -
and focus much of its discussion on emerging market currency
turmoil and how the U.S. Federal Reserve's stimulus easing could
Economists have expressed optimism that the effect of an
easing cycle that shaved 200 basis points from the interest rate
starting in 2012 is beginning to be seen in growth levels,
making it likely the board will begin lifting rates as soon as
"The outcome of the meeting is clear; no change," said Munir
Jalil, an economist at Bogota-based Citigroup.
"But the internal discussion will be a lot more interesting.
They have a lot to talk about on the international front because
Colombia is not an island to the problems in emerging markets."
Fears about the health of many major emerging economies have
sent investors out of those markets, prompting many central
banks to raise rates to contain the effects of the selloff.
Currencies tanked across emerging markets in anticipation of
further withdrawal of U.S. monetary stimulus and signs that
China's economy, the world's second largest, has come off the
Colombia's peso has weakened 4.5 percent so far this year
and 13.3 percent in the last 12 months.
Finance Minister Mauricio Cardenas - who represents the
government at policy meetings - hinted this week that the board
could opt to scrap its dollar purchase program put in place to
weaken the currency - which in 2012 strengthened 9 percent.
The bank has been intervening in the exchange market for
more than two years to stem gains in the peso and at the
December board meeting extended its program to as much as $1
billion through the end of March.
FASTER 2014 GROWTH
Inflation that is below the bank's target range of 2 to 4
percent has given the board - led by Jose Dario Uribe - leeway
to keep the interest rate at a growth-fuelling level. Consumer
prices rose 1.94 percent in 2013 and are expected to nudge up
2.2 percent in the 12 months through January.
At 3.25 percent, Colombia's interest rate is the lowest in
Latin America. Regional rates span from 4 percent in Peru to
10.5 percent in Brazil.
The economy grew a better-than-expected 5.1 percent in the
third quarter against the previous year but the government
revised down its second quarter number.
While the government has stuck to its official economic
growth forecast of 4.5 percent for 2013, Cardenas indicated the
expansion could have been less. In an interview with Reuters
last week he suggested GDP growth could be between 4.3 percent
and 4.5 percent for 2013.
This year he sees a 4.7 percent expansion.