UPDATE 1-Colombia raises key rate to 5.75 pct to tackle inflation

viernes 18 de diciembre de 2015 15:40 GYT
 

(Adds central bank, analyst comment, detail)

BOGOTA Dec 18 (Reuters) - Colombia's central bank raised its benchmark lending rate a quarter point on Friday to put the brakes on accelerating inflation and bolster credibility with investors who feel it should have acted sooner.

The seven-member board decided by majority to boost the lending rate to 5.75 percent, meeting the forecast of 24 of 29 analysts in a Reuters survey this week.

The bank has sought to play catch up on stemming inflation which has risen well above its 2 percent to 4 percent target range since February. The market has raised concerns policymakers should have begun tightening in May, and the minutes of the last meeting showed concern for its credibility.

"Higher than expected increases in food prices and additional increases in the exchange rate, related largely to the fall in oil prices exert new pressures on inflation," the bank statement said.

"At the same time, inflation expectations remain high and the risk of a slowdown in domestic demand, beyond what's consistent with the decline of national income, has slowed."

Some analysts see inflation hitting 7 percent next year, before coming down to end 2016 at about 4 percent.

Latin America's fourth-largest economy is also facing a slowdown in economic growth 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, down from 4.6 percent last year.

A drop in oil prices has hurt the government's spending plans. Crude oil is Colombia's biggest export and leading source of foreign currency.   Continuación...