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By Julia Symmes Cobb
BOGOTA, Nov 28 (Reuters) - Colombia’s central bank held its benchmark interest rate steady on Friday as inflation remains on target and policymakers grapple with the economic impact of a drop in global oil prices.
Bancolombia’s seven-member board voted unanimously to keep the lending rate at 4.5 percent for a third consecutive month, meeting the forecast of 15 out of 16 analysts in a Reuters survey this week.
The bank also set a 2015 inflation target range of 2 percent to 4 percent, with 3 percent as the ideal level.
“International oil prices fell again and remain below the estimates of the technical team,” the board said in a statement.
Oil is the biggest source of foreign exchange for Colombia, the fourth-largest oil producer in Latin America, and the big drop in crude prices over the past five months has hurt the country’s trade balance. That “translates to a deterioration in national income,” the board said.
Bancolombia increased its benchmark rate 125 basis points between April and August after unexpectedly quick first-quarter growth raised questions about inflationary pressure. Last month the board also voted unanimously to hold borrowing costs.
The global scenario remains uncertain, policymakers said, as China, Europe and other Latin American nations continue to experience low growth, while the United States starts to expand.
“The rate decision reflects caution about the negative impact the Colombian economy could feel from the outside,” Bancolombia said in a statement.
International crude prices have fallen more than a third since June, resulting in a decline in royalties and tax revenue.
“To the extent there’s this hit on oil that somehow ends up impacting the economy, it will be difficult for the bank to consider additional rises and considering cuts is not an immediate scenario,” said Munir Jalil, chief economist at Citibank for Colombia, Venezuela and Ecuador, who expects a stable rate through 2015.
The Organization of the Petroleum Exporting Countries decided on Thursday not to reduce output, a move that means prices could continue to decline.
The peso fell 2.5 percent to 2,217 per dollar on Friday, its lowest level since 2009, on the oil concerns.
Second-half growth will be driven primarily by internal demand and will be below the 5.4 percent expansion of the first half of this year, the bank said. It sees 2014 GDP growth at about 5 percent, one of the highest rates in the world. (Additional reporting by Monica Garcia; Editing by Paul Simao, Helen Murphy and Peter Galloway)