Colombia Central Bank Seen Raising Rate to 3%

Colombia’s central bank board is expected to raise the benchmark interest rate by 50 basis points to 3% this week and continue increases throughout 2022 as policymakers try to tamp down above-target inflation, a Reuters survey showed on Monday.

Twenty-one analysts said in a survey a half-point increase at the board’s last meeting of the year will likely be backed by a majority of the seven policymakers though some will support a more gradual 25 basis point rise.

If the half-point hike goes through, the interest rate will have risen 125 basis points since the board began a cycle of inaction in September.

“Taking into account that total inflation is at 5.26% and there will be additional inflationary pressures in the coming months, we expect the central bank to increase the rate by 50 basis points,” brokerage Alianza Valores said in a report.

“Despite this, if the vote is split, the increase might be 75 basis points,” it noted.
In the year to November, consumer prices grew 5.26 percent, considerably above both expectations and the bank’s long-term objective rate of 3 percent.

According to the analysts, the board will likely support another rate hike in January, and the rate will conclude next year at 5%, according to median forecasts in the survey, as inflationary pressures and global supply chain challenges persist.

According to the central bank, Colombia’s GDP would grow 9.8% this year before dropping to 4.7 percent in 2022.