September 5, 2013 / 2:20 AM / 4 years ago

UPDATE 1-Colombia's Santos calls on central bank to cut interest rate

BOGOTA, Sept 4 (Reuters) - Colombian President Juan Manuel Santos on Wednesday expressed hope that the central bank would cut the benchmark interest rate at the next monetary policy meeting as benign inflation provides room to help economic growth.

Santos, a former finance minister, said during an address in the coastal city of Santa Marta that low inflation would allow another reduction in borrowing costs from the current level of 3.25 percent.

In a split vote last week, central bank policymakers held the rate steady for a fifth straight month but hinted that the economy may require another reduction. The seven-member board meets at the end of each month to vote on monetary policy.

The bank has been able to keep borrowing costs at their lowest level since January 2011 as inflation remains at the bottom end of its target range of 2 percent to 4 percent. Inflation is expected to end the year below 3 percent.

Consumer prices for August are due to be disclosed on Thursday.

Central bank chief Jose Dario Uribe said last week there is a risk that economic growth could end this year below 4 percent, the level the board previously said was likely.

In 2012, economic expansion eased to 4 percent from 6.6 percent a year earlier.

Among risks the monetary authority has highlighted are lower economic growth in key trading partner countries, volatility in global financial markets and the possible withdrawal of monetary stimulus in the United States.

Other concerns are weak industrial output and labor disputes in the coal and agriculture sectors that caused a slowdown in expansion during the first quarter when similar walkouts look place.

A six-week strike at coal miner Drummond and a 15-day farm protest could crimp growth if they stretch on too long, economists have said.

Finance Minister Mauricio Cardenas already has lowered the government’s official economic growth target for 2013 to 4.5 percent from 4.8 percent and suggested another downward revision could be possible.

Even though the central bank is independent from the government, Santos has frequently called on it to make specific policy decisions.

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