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By Julia Symmes Cobb
BOGOTA, Sept 30 (Reuters) - Colombia’s central bank kept its benchmark interest rate unchanged on Friday, as expected by analysts, as policymakers attempt to quell stubbornly high inflation even as economic growth slows.
The seven-member board decided unanimously to maintain the lending rate at 7.75 percent, as predicted by analysts in a Reuters survey.
Inflation, which has begun to fall after reaching nearly 9 percent in July, will continue to decrease now that a prolonged drought, a truckers strike and currency depreciation which lead to spikes in consumer prices have eased, the board said in a statement.
“The effects of temporary supply shocks that have affected inflation and inflation expectations have begun to reverse and the board expects this trend to continue. This, together with monetary policy actions taken so far, should lead inflation to the target range in 2017,” the statement said.
The bank’s long-term target range for inflation is between 2 and 4 percent.
Finance Minister Mauricio Cardenas, who represents the government on the board, said it would not be the time to consider rate cuts until it was more certain inflation would be within the target range next year.
“Even if we are optimistic about the future behavior of inflation...we need to have more clarity that it will be below 4 percent at the end of next year,” Cardenas said.
Food prices should continue to fall until at least the first quarter of next year, the board added.
The current account deficit for 2016 could be lower than what was projected last month and data continues to suggest a downward trend for economic expansion for this year to the 2.3 percent predicted by the bank’s technical team.
The government said the economy will expand by 2.5 percent in 2016.
A Reuters survey of 15 analysts earlier this week unanimously predicted the board would hold the rate, and a majority said the rate will be held steady until the end of the year.
Twelve-month inflation was 8.10 percent in August, slightly below July, when it was 8.97 percent.
President Juan Manuel Santos said this week policymakers could begin to consider decreasing the rate to avoid high borrowing costs affecting the economy. (Reporting by Julia Symmes Cobb, additional reporting by Nelson Bocanegra, Carlos Vargas and Monica Garcia; Editing by Diane Craft and Lisa Shumaker)