Stocksak: Colombia central bank to raise rate to 11% to address high inflation

© Stocksak. FILE PHOTO – A general view of Colombia’s central banks in Bogota, Colombia, October 9, 2019. REUTERS/Luisa Gonzalez/File Photo

Nelson Bocanegra

BOGOTA (Stocksak). Colombia’s central banks is expected to raise borrowing costs by 11% on Friday, in line with international policymakers who are trying reduce high inflation.

In a Stocksak survey, 12 out of 14 analysts said that the seven-member Board will raise the benchmark rate 100 basis points. One analyst predicted a 75-basis point increase and another forecast a 50 basispoint increase.

If the majority of the predictions are met, it will be the highest rate since July 2001.

“We expect 100 base points for the meeting,” but Camilo perez, chief economist at Banco de Bogota said that more interest rate hikes are needed because inflation is rising. He predicts another rate increase of 50 basis points at the December meeting.

Through September, inflation rose by 11.44% year-on–year, almost four times the bank’s long-term target of 3%. Analysts predict that it will take 2023 before the target figure returns to normal.

Perez stated that “This cycle in monetary policy was the most aggressive we have registered this century.”

Since September 2021, the bank has increased its rate by 825 basis point.

Jose Antonio Ocampo, Finance Minister, represents the government on this board. He considers high inflation a supply-side issue and said last week that it would be difficult to not raise the rate in companies with other central banks.

Ocampo asked the bank on Wednesday to discuss liquidity and futures markets at its Friday meeting.

Some analysts have not ruled possible currency interventions by Bank amid a deep decline in Colombian pesos due to international uncertainty, market reticence and promises by leftist government to implement a 4 billion tax reform and ban new oil contracts.

The bank allowed dollar auctions through forwards and swaps during the coronavirus epidemic.

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