Colombia's central bank could raise benchmark interest rate further

BOGOTA, Oct 4 (Reuters) - Further increases to Colombia's benchmark interest rate may be necessary in the coming months as the central bank tries to bring inflation in line with its 3% target, according to minutes from the bank's meeting last week.

Colombia's central bank board raised its benchmark interest rate by 100 basis points to 10% last Thursday, as inflation pressures and domestic consumption remain robust and central banks around the world boost rates.

The country's 12-month inflation hit 10.84% in August and the market expects the figure to have risen to 11.25% in September.

As the bank tries to push inflation back towards the 3% target, these pressures could necessitate further interest rate rises this year, according to minutes from the meeting, published late on Monday.

"(The board) pointed out that additional increases to the benchmark rate could be necessary in the coming months, depending on the information available at any given time on the internal and external economic situation, and its prospects," the board said in the minutes.

Six of the board's seven members voted to hike the interest rate by 100 basis points last Thursday, with one board member voting to increase the rate by 50 basis points, which would have taken it to 9.5%.

The lone policymaker warned that the biggest risk posed by aggressive monetary policy tightening was a "profound deceleration" in production and employment, adding that additional interest rates would more greatly impact economic growth over inflation.

Inflationary pressures have not eased despite 825 basis points worth of hikes to the benchmark interest rate over the last year.

"The trend of foreign interest rate increases entail similar adjustments in domestic interest rates, on which (the board member) observed that such high interest rates imply considerable risks on the consumer portfolio, the productive sector and government financing," the minutes said.

Analysts surveyed predicted that policymakers will take the rate to 11% before the end of the year.
Reporting by Oliver Griffin; Editing by Emelia Sithole-Matarise

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.