UPDATE 1-Colombia halts year-long rate tightening cycle; cuts expected

miércoles 31 de agosto de 2016 16:51 GYT

(Adds bank and analyst comment, details from bank statement)

By Helen Murphy and Nelson Bocanegra

BOGOTA Aug 31 (Reuters) - Colombia's central bank held its benchmark interest rate on Wednesday for the first time in a year, as policymakers grappled with a sluggish economy and fast-climbing consumer prices that have put their 2017 inflation target at risk.

The seven-member board decided by majority to maintain the lending rate at 7.75 percent after raising it 325 basis points, meeting analysts' expectations it would halt its tightening cycle.

The board voted six-to-one to hold the rate, with one member calling for another quarter-point hike. Analysts expected the bank's next move would be to ease rates, possibly before the end of 2016.

Policymakers have struggled with the twin constraints of slowing economic growth and stubbornly high inflation, which at 8.97 percent in July was more than double the bank's target range of 2 percent to 4 percent.

The decision to give breathing room to the economy comes after the government revealed on Monday that second-quarter gross domestic product grew a slower-than-expected 2 percent annually, a seven-year-low.

"The dynamics of the economy have been weaker than projected and inflation and expectations remain high and exceed the goal," the bank said in a statement.

"It is expected that the temporary supply shocks that have affected inflation and its expectations will begin to reverse in the coming months."   Continuación...