BOGOTA, July 31 (Reuters) - Colombia’s central bank is widely expected to raise its benchmark interest rate on Thursday for a fourth straight month to keep a lid on inflation as the economy grows faster than foreseen.
Policymakers have sought to pull stimulus from the economy by boosting lending rates while keeping consumer prices within the central bank’s target range of 2 to 4 percent.
The seven central bank board members will begin meeting at 8.30 a.m. local time (1330 GMT).
Of 31 analysts in a recent Reuters poll, 30 expected the bank to raise the rate by 25 basis points to 4.25 percent, while one said the bank would hold it steady at 4 percent.
“Inflation is still controlled but it could start moving up next year, so there’ll be a quarter-point rise,” said Washington-based strategist Pedro Tuesta at 4Cast Inc. “The bank still sees an output gap and so space for further economic growth, but I think that has now closed.”
The economy has recovered this year to levels that have surprised the market, growing by 6.4 percent in the first quarter and prompting Finance Minister Mauricio Cardenas to consider raising his growth estimate for 2014 from 4.7 percent.
He has said he wants to see figures for second-quarter gross domestic product before making a decision.
Central bank policymakers could also opt to raise their estimate for 2014 economic growth from the current 3.3 percent to 5.3 percent, with 4.3 percent having been seen as most likely.
The bank has indicated that a neutral interest rate in the current cycle is lower than in previous hiking cycles, prompting economists to believe that policymakers will halt rate increases sooner than they have in the past.
In monetary policy terms, a neutral interest rate is one that does not affect the economy as it occurs when growth is at potential and inflation is on target.
“Given that, I think the rate will move to 4.75 percent by about September and that will be that,” Tuesta said.
Policymakers have said recent rate hikes have been aimed at reining in inflation pressures early to avoid having to make larger remedial adjustments later on.
June inflation data, the most recent available, showed price growth at 2.85 percent, which was still a little below the midpoint of the central bank’s 2 to 4 percent target range.
Colombia’s president, Juan Manuel Santos, will be sworn in for his second term next week and may discuss plans to create jobs, boost agriculture and spur economic growth as peace talks with FARC rebels raise the possibility of an end to five decades of war and an improved business environment. (Reporting by Helen Murphy; Editing by Peter Galloway)