Borrowing costs

Colombian central bank raises borrowing costs to 10%, raises 2022 GDP estimate

BOGOTA, Sept 29 (Reuters) – Colombia’s central bank board on Thursday raised the benchmark interest rate by 100 basis points to 10% as inflationary pressures and domestic consumption remain robust and central banks around the world are raising rates.

The board was split on how to raise the rate, with six policymakers backing the 100 basis point hike and one voting for 50 basis points.

The bank raised its growth estimate for 2022 to 7.8% from 6.9% previously, but lowered the forecast for next year to 0.7% from 1.1% previously.

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Fighting inflation is the top priority, Finance Minister Jose Antonio Ocampo, who represents the government on the board, told a news conference. “We hope that this series of decisions will have an effect in terms of curbing inflation.”

Eight of 17 analysts in a Reuters survey last week expected the bank to raise borrowing costs by 100 basis points, while the rest expected steeper increases of 125 basis points and 150 basis points. .

“Monetary policy in developed countries has become more restrictive than expected, which has translated into a deterioration of international financial conditions and a significant depreciation of the peso and other currencies,” the board said in a statement. communicated. “Fears of a global recession have increased, leading to declines in commodity prices.”

“The pace of economic activity remained buoyant in the second quarter. Based on this, the technical team raised the gross domestic product growth forecast for 2022 from 6.9% to 7.8%,” it said. -he adds.

The central bank’s meeting followed recent rate hikes by its peers in the United States, Britain, Switzerland and Taiwan, among others, as policymakers grapple with a global spike in inflation and recessions in some countries.

Analysts have continuously raised their inflation forecasts for Colombia. If expectations from a Reuters survey are met, annual inflation will be 11.25% in the 12 months to September, nearly four times the bank’s long-term target of 3%. Read more

Inflationary pressures have not abated despite increases of 825 basis points in the benchmark interest rate over the past year.

Analysts polled predicted that policymakers would raise the rate to 11% before the end of the year.

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Reporting by Nelson Bocanegra and Carlos Vargas; Written by Julia Symmes Cobb; Editing by Chizu Nomiyama and Richard Chang

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