BOGOTA, Jan 30 (Reuters) - Surprise interest rate decisions over the last two months by Colombia's central bank and the expected appointment of two new board members next month triggered market uncertainty on Monday, sending local debt yields higher as investors fret about monetary policy.
In a tight vote on Friday, the seven-member central bank board held the lending rate at 7.5 percent, though most analysts and fund managers had expected a cut.
A month earlier, the board also made an unexpected move, voting narrowly to cut borrowing costs for the first time in four years. Most analysts in a Reuters poll had expected the interest rate to be held.
Investors reacted early on Monday, sending yields on the benchmark local Treasury bond maturing in July 2024 up to 6.68 from 6.56 on Friday.
"This complicates investor decisions as far as what is coming," said Banco de Bogota's Camilo Perez. "The short part of the yield curve is certainly going to be pushed upward and there will be some price effects not expected a few days ago."
The central bank's surprise decisions come amid uncertainty over two new board members who President Juan Manuel Santos will appoint in the coming weeks.
Though the board is independent analysts wonder if new members could sway decisions toward Santos's desire for cuts.
New bank chief Juan Jose Echavarria, who took office last month, said on Friday that while the board agrees interest rates need to come down to stimulate economic growth, policymakers are divided over how quickly cuts should come.
He said the hurdle to cutting is a still-high inflation, which threatens to miss its 2-4 percent target range for a third year.
Following Echavarria's comments analysts began to predict a much shorter cutting cycle.
"The degree of division on the board, coupled with the lack of clear communications - reflected in two policy surprises in a row - and the fact two new members will join soon, make it difficult to forecast the policy path," Mario Castro, New York-based strategist for Nomura Latin America, said in a note.
Fewer rate cuts could play against a recovery in the economy, which is expected to grow 2 percent this year, close to the 1.8 percent expected for 2016.
"What's important is that the economic recovery is not taking place and I think that crucial (bank) meetings to inject stimulus are being missed," said Andres Abadia, senior economist at Pantheon Macroeconomics in London. (Reporting by Nelson Bocanegra; Writing by Helen Murphy and Diane Craft)