January 27, 2017 / 8:01 PM / a year ago

UPDATE 1-Colombia cenbank holds rate at 7.5 pct on inflation concerns

(Adds quote, details on rate hold)

By Julia Symmes Cobb and Helen Murphy

BOGOTA, Jan 27 (Reuters) - Colombia’s central bank held its benchmark interest rate on Friday amid concerns over still-high inflation, even as economic growth estimates head downhill.

Global uncertainty and an uptick in inflation expectations were the primary reasons for the rate hold, Finance Minister Mauricio Cardenas, who represents the government on the board, said after the meeting.

The seven-member board voted by four to three to maintain the lending rate at 7.5 percent. A trio of policymakers favored a rate cut, the board said in a statement.

“Uncertainty over international financial and trading conditions has increased since the last board meeting, with potential impact on global interest rates and the dollar,” the statement said.

Inflation expectations for the close of 2017 rose to 4.46 percent in the central bank’s survey this month from 4.19 percent in December, above the bank’s 2 percent to 4 percent target range.

Despite remaining inflationary risks, it is possible for inflation to fall to within the target range this year, new bank chief Juan Jose Echavarria said. Policymakers are agreed that interest rates must come down, he added, but disagree on how quickly.

Gross domestic product growth likely expanded more slowly than expected in the final quarter of last year, the board said, reaching 1.8 percent in 2016. In 2017, expansion will be between 0.7 percent and 2.7 percent, with 2 percent as the most likely figure, policymakers added.

“In Colombia, several of the indicators of economic activity and perception for the fourth quarter of 2016 suggest that the economy had low dynamism, though it was somewhat better than in the third quarter,” the statement said.

The board also modified its current account deficit estimate for 2016 to 4.5 percent of GDP, equivalent to $12.6 billion.

Inflation will continue to move down toward the target, the policymakers said.

“The effects of several of the supply shocks that have affected inflation and its expectations continue to reverse and this trend is likely to continue,” they said. (Reporting by Bogota newsroom; Editing by Meredith Mazzilli)

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