Colombia central bank surprises market with 25-basis-point rise on inflation worries
EWZ•Colombia’s central bank raised its benchmark interest rate by 25 basis points to 12.25%, as persistent inflation worries outweighed most analysts’ expectations for no change. Annual inflation was 6.24% through August, more than double the bank’s 3% target.
1. Rate decision
Four of the central bank’s seven board members backed the 25-basis-point increase; two voted to hold rates and one favored a 50-basis-point hike. The decision was the first attended by Finance Minister Miguel Gomez, appointed by President Abelardo De La Espriella.
2. Inflation concerns
The board said annual inflation reached 6.2% in August, citing food and regulated prices, which rose 6.1% and 6.8%, respectively. It said the onset of El Niño could add upward pressure to those prices.
3. Market expectations
In a poll, 19 of 27 analysts expected rates to remain at 12%, while six forecast a 50-basis-point increase and two expected a 25-basis-point rise. The board also said economic growth may be slowing as international financial conditions become somewhat tighter.
