Colombia central bank board ups interest rate to 6% on inflation pressures

Reuters

Published Apr 29, 2022 01:11AM ET

Updated Apr 29, 2022 02:45PM ET

By Nelson Bocanegra and Carlos Vargas

BOGOTA (Reuters) -Colombia's central bank board raised the benchmark interest rate by 100 basis points to 6% on Friday, its highest level in nearly five years, as it continues increases in response to persistent inflation pressures.

The seven-member board was divided on how sharply to increase the rate, with four policymakers backing the 100-point increase and the remainder voting for a sharper 150-point rise.

The bank's technical team also raised its growth projection for the year, to 5% from 4.7%.

Colombia - like many countries - is experiencing high inflation figures because of increasing domestic demand, global supply chains issues and higher fertilizer costs due to the war in Ukraine.

Inflation stood at 8.53% in the 12 months to March, almost triple the 3% central bank target.

"The idea is that inflation will fall during the rest of the year and end the year around 7%, that's approximately where the general market and technical team expectations are," board chief Leonardo Villar said.

He added that the team's revision to the estimate - which currently stands at 4.3% - will be published in its quarterly monetary policy report on Monday.

"The prospects of a faster-than-expected increase in interest rates in the United States and the impact on international prices of Russia's invasion of Ukraine could generate additional inflationary pressures," the board added in a statement.

The rate decision met the expectations of fifteen analysts surveyed in a recent Reuters poll, who agreed the board would hike the rate to 6%, its highest level since May 2017.

Some analysts had predicted the board could opt for a sharper rise because there is no interest rate vote in May.