Colombia central bank seen holding rate to bolster slower growth

viernes 26 de septiembre de 2014 09:30 GYT

By Helen Murphy and Nelson Bocanegra

BOGOTA, Sept 26 (Reuters) - Colombia's central bank is expected to hold the key interest rate steady for the first time in six months as policymakers judge the lending rate may be reaching a neutral level while the economy needs help to maintain growth.

A Reuters poll this week showed 29 of 36 analysts expect the policy board to keep the rate steady at 4.5 percent, the highest since October 2012, as it eases off a spate of monetary stimulus that stoked growth.

The bank began a tightening cycle in April, lifting the rate from 3.25 percent - where it had remained for 11 months - to stem any future inflationary pressures.

"It's highly probable the rate will be held, basically because the economy is slowing, and even while inflation is increasing, it's still more or less in line with recent bank expectations," said Alejandro Reyes, economist at brokerage Ultrabursatiles.

"There are clearly divisions on the board, but when the bank takes decisions that change policy they usually do it with unanimity to demonstrate institutionality," said Reyes, who has worked at the central bank and who expects a six-month pause.

Colombia's economy expanded less than expected in the second quarter, slowing to 4.3 percent from 4.5 percent a year earlier and shrinking compared with the first three months of the year. The central bank has said it is nearing its full productive capacity.

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.

Finance Minister Mauricio Cardenas has expressed some concern in recent weeks about Colombia's revenue stream as crude output begins to decline and an economy-driving oil boom wanes.   Continuación...