* Bank raises rates 25 bp for fourth month in row
* Lifts 2014 growth forecast to a most likely 5 pct
* Estimates growth in second quarter at 4.3 pct (Adds quote, details)
By Peter Murphy and Nelson Bocanegra
BOGOTA, July 31 (Reuters) - As expected, Colombia’s central bank on Thursday raised its benchmark interest rate for a fourth straight month to keep a lid on inflation, and boosted its 2014 economic growth forecast.
The bank’s policymaking board lifted the key lending rate by 25 basis points to 4.25 percent as it gradually withdraws monetary stimulus as growth gathers pace.
The decision had been forecast by 30 of 31 analysts in a Reuters poll this week.
The bank also raised its forecast for 2014 economic growth to between 4.2 percent and 5.8 percent, with 5 percent the most likely figure. That compares with its previous range of 4.3 percent to 5.3 percent, with 4.3 percent the most probable.
“Consumer confidence has improved, consumer credit has stopped decelerating, retail sales maintain their strong dynamic and the unemployment rate has shown a downward trend,” said bank chief Jose Dario Uribe, reading the board’s statement.
He said a strong performance in the construction sector, which helped push first-quarter growth to a higher-than-expected 6.4 percent, was likely to continue through the end of the year. The bank estimated second-quarter growth of 4.3 percent.
Colombia’s economy has been performing strongly this year on top of 4.7 percent growth in 2013, while inflation is hovering near the bank’s ideal level of 3 percent, the middle of its 2 percent to 4 percent target range. The bank also reiterated its view that annual inflation would be around 3 percent by the year’s end.
The country’s economic performance has been finding favor among investors. J.P. Morgan boosted the weighting of Colombia’s local debt in two of its indexes, and rating agency Moody’s raised the country’s foreign debt rating to Baa2 from Baa3.
The bank sees growth at 4.3 percent in the second quarter, Uribe said. The economy is producing close to its maximum capacity, narrowing a so-called negative output gap that was a factor that has enabled strong growth without spiking inflation, he said.
The El Niño weather anomaly, which tends to bring dry weather to the Andean region, is still not certain to occur in the next few months. If it does, Uribe said, it will likely be mild and not cause sustained rises in food or energy prices.
“It shouldn’t affect decisions about prices or wages in the economy,” he said. (Additional reporting by Helen Murphy; Writing by Peter Murphy; Editing by James Dalgleish, Peter Galloway and Steve Orlofsky)