July 10, 2014 / 10:11 PM / 4 years ago

Colombia central bank board member sees lower future rate hikes

BOGOTA, July 10 (Reuters) - 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 year. (Reporting by Helen Murphy)

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