BOGOTA, Feb 19 (Reuters) - Colombia’s central bank looks set to raise its benchmark lending rate this month to 6.25 percent, the sixth consecutive monthly increase, amid calls for the board to take measures to control the current account deficit and counteract inflationary pressures.
The seven-member board will raise the interest rate by 25 basis points at its February, March and April meetings, analysts said in a central bank survey last week, taking the rate to 6.75 percent.
Twelve-month January inflation was up to 7.45 percent, its highest level for 17 years and far above the bank’s long-term target range of 2 percent to 4 percent.
“Inflation rises have been very aggressive, the gap between consumer price increases and the interest rate is very wide and will continue widening, taking into account that price rises are expected to continue for at least the first half of the year,” said Juan David Ballen, analyst at Casa de Bolsa brokerage.
There is also growing worry over the high current account deficit, which is 6 percent above gross domestic product, according to government estimates. Finance Minister Mauricio Cardenas has called it unsustainable.
The current account deficit was a factor in Standard & Poor’s decision to lower its credit rating outlook on Colombia to negative this week.
Minutes from January’s meeting showed a tendency for further rate hikes in a bid to help inflation fall within the target range in 2017 and reduce the current account deficit.
Analysts said there likely remains division among policymakers - a majority favor gradual 25 point rises in the rate, while a minority support sharper hikes of 50 basis points.
“Although we think that the likelihood of seeing 50 basis point hikes has increased, we believe that the board will remain inclined to keep the current pace,” said Mario Castro of Nomura Securities.
“Indeed, we believe that the dovish wing of the board will be able to keep the current pace based on the same arguments.” (Reporting by Nelson Bocanegra; Writing by Julia Symmes Cobb; Editing by Bernard Orr)