(Adds Finance Minister comments, background on rate moves,
By Peter Murphy and Nelson Bocanegra
BOGOTA, April 25 Colombia's central bank
unexpectedly raised the benchmark lending rate for the first
time in more than two years on Friday, as policymakers sought to
ward off inflationary pressure as economic growth gathers pace.
The bank's seven-member board, headed by Jose Dario Uribe,
increased the lending rate a quarter point to 3.50 percent,
surprising investors who had expected it to hold the rate steady
for a 13th month. The last time borrowing costs were increased
was February 2012.
Colombia's benchmark interest rate had been held steady at
3.25 percent since March 2013, after a run of cuts that totaled
200 basis points since July 2012.
Finance Minister Mauricio Cardenas said the decision to
raise the rate was based on the Andean nation's accelerating
economic activity which has been bolstered by the long period of
comparatively low interest rates.
He said the time had come for a period of more normal
interest rates for the country's economy.
The central bank maintained its forecast range of 3.3
percent to 5.3 percent for economic growth with 4.3 percent the
most likely figure.
Cardenas said J.P. Morgan's decision in March to increase
the weighting of Colombia's sovereign debt in its indexes may
not have as big an impact on the country's currency as analysts
The currency strengthened sharply in the days following that
announcement as a surge of foreign cash flowed in to buy bonds
Colombia's inflation rate has begun to climb after falling
to its lowest since 1955 last year.
(Reporting by Bogota newsroom; Editing by Bernard Orr)