BOGOTA, Oct 10 (Reuters) - One member of Colombia’s central bank board dissented from the decision last month to hold the benchmark rate steady, wanting instead to raise the rate by a quarter point to 4.75 percent to ward off inflationary pressure, the minutes of the last board meeting showed on Friday.
While the majority of the co-directors voted to hold the rate at 4.5 percent, there was a difference of opinion on whether inflation needed to be brought more under control amid growth in domestic demand and healthy consumer confidence and how much help the economy needed to maintain healthy growth this year.
In announcing its policy decision last month, the central bank had said that the vote was not unanimous, but had not at the time detailed how many policymakers dissented.
Most of the seven-member board agreed that slower-than-expected second-quarter growth, the risks to the economy from an uncertain international environment and a decline in oil revenue warranted keeping the rate at a stimulating level, the minutes said. They said inflation expectations were anchored at the 3 percent target.
“Insofar as monetary policy acts with a lag, it is important to consider the risks that could affect confidence and the future performance of the real economy, particularly those inherent in the international environment and in fiscal policy,” the minutes said.
The bank began a tightening cycle in April, lifting the rate from 3.25 percent, where it had remained for 11 months. The increase was meant to stem any future inflationary pressures.
Economic growth in the third quarter could be above the 4.3 percent reported in the second quarter, which slowed from 4.5 percent a year earlier and shrank from the three months immediately prior, the minutes said.
While overall growth is expected to expand as much as 5 percent this year, the board expressed concern about how the economy could be impacted by a weakening of the oil sector, the nation’s biggest motor of growth.
“The boost from performance in the mining-energy sector has slowed, as has the downward trend in terms of trade,” the minutes said.
The board member who argued for a quarter-point increase said that there is still a positive output gap and inflation has continued to rise in terms of its expectations.
“It makes sense to raise the benchmark interest rate by 25 basis points to 4.75 percent, considering the data on growth in domestic demand during the second quarter, the relevant job market figures, and the business and consumer confidence indicators,” the co-director said.
Colombia’s inflation is forecast to end the year slightly higher than the mid-point of the 2- to 4-percent target range, a still-comfortable level, but above a near 50-year low of 1.94 percent in 2013. In September inflation was 0.14 percent.
The bank statement highlighted the contrast between economies that could impact Colombia. A recovery in the United States comes as China, Europe and other Latin American nations are slowing, and trade terms could deteriorate along with a drop in international oil prices, it said. (Reporting by Helen Murphy; Editing by Leslie Adler)