| BOGOTA, April 25
BOGOTA, April 25 Colombia's central bank on
Friday is expected to hold the benchmark lending rate unchanged
for the 13th straight month as economic growth continues to
gather pace, inflation remains controlled and uncertainty over
U.S. monetary policy persists.
The bank's seven-member board, headed by Jose Dario Uribe,
is likely to hold borrowing costs at 3.25 percent, according to
26 of 28 analysts surveyed by Reuters earlier in the week. Two
analysts forecast a quarter-point rate increase.
But the growth-promoting rate is expected to come to an end
some time after May with a quarter point increase to prevent
inflation moving beyond the bank's 3 percent target level.
"The strong numbers in retail sales and industrial
confidence as well as the evidence on a stronger recovery in the
U.S., will bring to the meeting the discussion of the start of
the hiking cycle in the coming months," Deutsche Bank said in a
bulletin. "We expect the central bank to keep the interest rate
unchanged in the April meeting."
The bank also may be loathe to raise borrowing costs just
yet to avoid exacerbating a surge in the peso that occurred in
March because of an influx of foreign investment into financial
U.S. investment bank J.P. Morgan last month raised its
weighting for Colombian sovereign debt in two of its indexes,
prompting new investment flows. An interest rate increase would
raise returns on bonds and cause the currency to strengthen
further as demand for it increased.
Finance Minister Mauricio Cardenas said this week the
central bank was momentarily speeding up dollar purchases
because of the stronger peso. That will reduce the cost of
building up reserves. The total $1 billion it plans to buy from
April to end-June has not been altered, he said.
"Up until April, there's still a shortage of information
that is leaving (the board) unsettled, believing that external
conditions continue to generate much uncertainty," said
Francisco Chaves, chief economist at Corredores Asociados
The central bank shaved 200 basis points off the interest
rate from July 2012 until March 2013 to boost economic growth,
and has held it steady ever since, with inflation at the lower
end of the bank's 2 percent to 4 percent target range.
Inflation last year was the lowest since 1955 at 1.94
percent but is slowly picking up as growth accelerates and the
population spends more on consumer goods.
The government expects the Andean nation, with large coffee
and coal sectors, and about 1 million barrels of daily oil
production, to grow 4.7 percent this year, faster than 2013's
expansion of 4.3 percent.
(Reporting by Peter Murphy; Editing by Steve Orlofsky)