Market divided on Colombia interest rate decision - hold or raise?- Reuters Poll

By Nelson Bocanegra

BOGOTA (Reuters) - Analysts are divided on whether Colombia's central bank board will hold the interest rate steady for the first time in 18 months or back one more increase in a tightening cycle meant to fight inflation, a Reuters poll showed on Friday.

Fifteen of 26 analysts predicted the seven-member board will hold the rate at 13% at its meeting next week, while the remaining 11 projected a 25 basis point increase to 13.25%.

The majority believed inflation will have reached its peak in March, when it rose to an unexpected 12-month figure of 13.34%, more than four times the bank's 3% target rate.

"We expect policymakers to stay on hold, but we do not rule out the possibility of a final +25bps move in light of the elevated March CPI reading," said Morgan Stanley in a note.

The board has raised borrowing costs by 1,125 points since September 2021 as economic growth sent inflation soaring. Colombia's economy expanded 7.5% last year.

Some analysts, however, are not convinced consumer prices have peaked, giving board members justification for one last hike.

"Core inflation, which responds purely to demand pressures and which the bank watches most, indicates that it could keep rising, including until mid-year," said Fabio Nieto, head of economic studies at Banco Agrario.

Finance Minister Jose Antonio Ocampo said on Thursday he was confident of lowering inflation.

"We expect a general fall in inflation this month and for that to facilitate monetary policy that helps (economic) reactivation," he said, adding he expects the bank to begin rate cuts in the second half.

Economic growth will slow to 1% this year, according to median figures from the poll, 2.3% in 2024 and 3% in 2025.

The analysts predicted the interest rate will remain steady until September or October, ending the year at 11.5%, 2024 at 6.75% and 2025 at 5.25%.

(Reporting by Nelson Bocanegra; Writing by Julia Symmes Cobb and Josie Kao)