May 7, 2018 / 4:18 PM / 5 months ago

April inflation could stymie Colombia central bank cut-analysts

BOGOTA, May 7 (Reuters) - Higher than expected inflation for April may mean Colombia’s central bank holds off on further cuts to the benchmark interest rate, in a bid to ensure prices end the year within the bank’s target range, analysts said on Monday.

Consumer prices increased by 0.46 percent in April, the government said on Saturday, well above the 0.28 percent the market had projected in a Reuters survey. The figure pushed 12-month inflation to 3.13 percent, within the 2 to 4 percent target range, but above the ideal mid-point of 3 percent.

Surprisingly low March inflation figures gave policymakers room to cut borrowing costs by 25 basis points to 4.25 percent at last month’s meeting, the lowest level in four years, as the board tries to boost economic growth.

“With the next policy decision coming in June, a slowdown in convergence, even if the main reason is food prices, should prompt caution from the central bank, which is something (board chief) Juan Jose Echavarria has said recently. With the data available, we expect the central bank to keep rates on hold for the time being,” Citi said in a note to investors.

Local TES treasury bonds fell to a yield of 5.98 percent in trading on Monday, down from a yield of 5.955 at the close of trading on Friday.

“The 4.25 percent could be the end level of the current monetary policy cycle,” Banco de Bogota said.

The central bank has cut 350 points from the interest rate since December 2016. (Reporting by Nelson Bocanegra Writing by Julia Symmes Cobb Editing by Helen Murphy and Susan Thomas)

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