Colombia central bank set to raise interest rate one last time

Colombia's central bank board is set to raise its benchmark interest rate at its meeting on Friday, in a final attempt to control high inflation, and in spite of slowing growth predicted for this year.

Eight of 15 analysts surveyed last week by Reuters said the seven-member board will increase borrowing costs by 100 basis points to 13%, while four expect a 75 basis points rise to 12.75% and the remaining three expect a half-point uptick to 12.50%.

In any of the three scenarios the interest rate would be the highest it has been since November 1999.

Continued increases would put the bank in line with its international counterparts like the Federal Reserve, which is expected to raise rates again before the lagged effects of its monetary policy tightening cycle are fully felt.

Analysts said the top argument for policymakers to raise the rate is a 24-year inflation high.

Consumer prices increases are expected to reach 13.5% in the first quarter and will remain well above the target rate of 3% until the end of next year.

"We are expecting a strong increase because inflation expectations remain very unanchored," said Ben Ramsey, Head of Latin America Economic Research at JP Morgan. "We think the board will want to give a signal that it's reaching the end of the hike cycle."

The policymakers have increased the rate by a total of 1,025 basis points since the tightening cycle began in September 2021.

Analysts have predicted the board will begin cutting the rate mid-year, taking it to 11% by the end of 2023 and 7% in 2024.