January 31, 2020 / 7:28 PM / a month ago

Colombia's central bank holds key lending rate at 4.25%, as expected

BOGOTA (Reuters) - Colombia’s central bank unanimously held its benchmark interest rate steady at 4.25% yet again at a meeting on Friday, adding that it expects inflation to fall closer towards the 3% target by the end of the year.

FILE PHOTO: The Colombia's central bank logo is seen in Bogota, Colombia October 1, 2018. REUTERS/Luisa Gonzalez

The decision by the six board members present - economist Arturo Galindo will join the usually seven-member board in February - met the predictions of all analysts in a Reuters survey last week.

Those analysts were divided over expectations for the board to hold the rate - which has been in place since April 2018 - throughout 2020 or raise it by between 25 and 75 basis points in the coming months.

In a statement the bank said annual inflation fell slightly to 3.8%, which is significantly higher than the targeted 3%.

However, it added that inflation is expected to fall during the course of the year.

“We continue to hold that by the middle of 2020, inflation will reach around 3.5%,” bank chief Juan Jose Echavarria told journalists. “At the end of 2020 it will be nearer 3%.”

In last week’s poll, analysts said they expected inflation of 3.36% for 2020, before falling to 3.19% next year.

The bank said it expects Colombia’s current account deficit to be above 4% of gross domestic product in 2019 and maintained its outlook for economic growth last year and in 2020 at 3.2% and 3.3% respectively.

“In this sense, the bank is a bit more pessimistic compared to other groups, we are in the low range,” Echavarria said.

The government’s DANE statistics agency will reveal GDP data for 2019 in mid-February.

Reporting by Carlos Vargas, Nelson Bocanegra and Oliver Griffin; Editing by Chris Reese and Alistair Bell

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