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(Adds comment from analyst, bank statement)
BOGOTA, Nov 27 (Reuters) - Colombia's central bank increased the benchmark interest rate by a quarter point on Friday in an effort to stem rising inflation that is already well above the bank's target range.
The seven-member board decided by majority to boost the lending rate to 5.50 percent, meeting the forecast of nine of 21 analysts in a Reuters survey. The bank maintained its inflation target at 2-4 percent with 3 percent as the ideal level.
The latest rate increase comes on top of 75 basis points it has raised over the previous two months.
"Inflation expectations have increased and the risk of a slowdown in domestic demand, beyond that consistent with the decline of national income, has slowed," the bank statement said.
"The acceleration of inflation so far this year is mainly explained by the transfer of the nominal depreciation (of the peso currency) to consumer prices and the increase in costs of imported raw materials, as well as less dynamic in the food supply."
November's annual inflation reached 5.89 percent. The bank said the most recent data showed inflation would be a bit above 4 percent in 2016.
Analysts have said the bank needs to play catch-up on easing inflation and should have boosted the rate sooner than its first quarter-point increase in September.
Many analysts like Juan David Ballen, economist at brokerage Casa de Bolsa, had expected a half-point increase.
"Given the bank took the decision late to increase the interest rate and that inflation expectations for the coming months are likely to continue rising," he said.
Economists expect consumer price inflation to go as high as 6.30 percent by the close of 2015 and 7 percent in mid 2017 before coming down. Both are well above the bank's target range.
Inflation has been sent higher by dry weather which has made the food and production chain more costly and a severe depreciation in the peso, which has weakened about 40 percent against the dollar in the last 12 months.
Although the majority of the bank's board has said inflation increases are largely due to transitory factors, the bank said this week it may have underestimated the impact on inflation.
Latin America's fourth-largest economy is also facing a growth slowdown that has led the government to reduce expansion projections to 3.3 percent from 3.5 percent for this year and next. The bank expects growth at about 3 percent both years. (Reporting by Bogota newsroom; Editing by Chizu Nomiyama)