July 27, 2017 / 1:34 PM / a year ago

Colombia central bank seen cutting interest rate to 5.50 pct

BOGOTA, July 27 (Reuters) - Colombia’s central bank board is expected to cut the key lending rate to 5.50 percent at its meeting on Thursday, in a bid to stimulate economic growth as analysts and the government further reduce their expansion predictions for the year.

In a survey last week, 13 of 17 analysts polled said the seven-member board would trim the rate by 25 points, while the remaining four said the policymakers would opt for a sharper cut of 50 points, mirroring their June vote.

The meeting comes a few days after the government cut its growth forecast for this year and next.

Finance Minister Mauricio Cardenas, who represents the government on the bank board, told reporters that gross domestic product would likely expand 2 percent this year, down from a previous forecast of 2.3 percent, while growth in 2018 would be 3 percent, lower than an earlier projection of 3.5 percent.

Analysts said it was possible the bank would follow in the government’s footsteps and announce a cut to its growth projection for this year, which currently sits at 1.8 percent.

“Given the deceleration of demand it is possible the board will feel it has the opportunity to contribute to stabilizing the cycle,” said Diego Camacho, head of economic studies at the Ultrabursatiles brokerage. Camacho expects a 25 basis points cut in the rate.

Inflation dipped into the 2 percent to 4 percent target range in June for the first time since January 2015, which may help galvanize a further reduction in the rate.

“The indicators that were published last month confirmed that the weakness goes further than we imagined up until even a few weeks ago and we are convinced that inflation in July will also fall significantly,” said Camilo Perez, head economist at Banco de Bogota.

If the board lowers the rate it will mark the sixth consecutive cut and seventh overall in a reduction cycle begun last December. Cuts total 200 basis points. (Reporting by Nelson Bocanegra; Writing by Julia Symmes Cobb; Editing by Helen Murphy and Lisa Shumaker)

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