July 23, 2018 / 3:26 PM / 3 months ago

Colombia's central bank seen holding interest rate at 4.25 percent in July: Reuters poll

BOGOTA (Reuters) - Colombia’s central bank will keep its interest rate stable at Friday’s meeting, a decision that may extend through the remainder of the year given short-term inflationary pressure and a recovering economy, according to a Reuters poll.

The survey of 25 analysts on Monday agreed that the monetary authority would keep borrowing costs unchanged at 4.25 percent at its monthly meeting this week, a level it has held since April. The seven-member board will likely vote unanimously, the survey showed.

The bank is expected to begin raising the rate again next year, ending 2019 at 4.75 percent as the economy consolidates its recovery, according to the poll.

“The central bank should keep rates on hold. Inflation has risen in the past two months, which has led inflation expectations to rise a bit. Activity indicators like retail sales, industrial production, the manufacturing index and consumer confidence have all been posting data that suggest a recovery is underway,” Citibank said in a note to investors.

“This combination implies there is no room for further cuts, but still no solid reason to consider any increase soon,” it said.

According to the survey, consumer prices will register an increase of 0.12 percent in July, pushing accumulated 12-month inflation to 3.37 percent, above the central bank’s 3 percent target.

Inflation expectations for the end of this year remained at 3.35 percent, the survey showed, while by the end of 2019 they had decreased slightly to 3.24 percent from 3.30 percent in the June poll.

Economic growth forecasts remained at 2.55 percent for this year and 3 percent for 2019, unchanged from the survey last month.

The government sees GDP growth this year at 2.7 percent.

Writing by Helen Murphy; Editing by Susan Thomas

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