Colombia central bank expected to raise interest rate another notch

viernes 30 de mayo de 2014 09:30 GYT

By Peter Murphy and Nelson Bocanegra

BOGOTA May 30 (Reuters) - Colombia's central bank board is expected to raise interest rates by a quarter percentage point on Friday on top of the same increase last month, as growth gathers momentum and policymakers seek to head off a moderate rise in inflation early on.

Thirty of 36 analysts surveyed in a Reuters poll on Monday expected a 25 basis point rise for the second straight month, which would take borrowing costs to their highest since January 2013.

"Inflation is not easing and neither is the economy weakening. ... Based on this it's advisable to raise the rate to avoid a heating-up in the future and financial disorder," said Miguel Medellin, head of research at the Asobancaria banking industry association.

The other six analysts expected the bank to raise rates but slower, while they observe the direction of economic indicators. April 12-month inflation at 2.72 percent, was the highest since October 2012. It had dipped to its lowest since 1955 last year.

"After April's 25 bp increase, we expect the next hike in June and the rate to rise to 4.5 percent by December 2014," Merrill Lynch said in a bulletin.

A majority of analysts surveyed said the benchmark rate will rise to 4.25 percent to 4.5 percent by the end of this year, and between 5 percent and 5.25 percent by the close of 2015.

Colombia is in the middle of presidential elections but the outcome of a second round vote on June 15 is seen as innocuous for the economy. Both finalists, incumbent President Juan Manuel Santos and right-wing Oscar Ivan Zuluaga are former finance ministers with a reputation for pro-business policies.