Bloomberg.com: Colombia Bank Raises Benchmark Lending Rate to 7.75% (Update2)

リンク: Bloomberg.com: Latin America.

Colombia Bank Raises Benchmark Lending Rate to 7.75% (Update2)

By Andrea Jaramillo

Jan. 26 (Bloomberg) -- Colombia's central bank raised the country's benchmark lending rate to its highest since March 2002, as the nation's strongest growth in more than a decade threatens to stoke inflation.

Policy makers in Bogota lifted the interbank overnight rate a quarter-point to 7.75 percent, in line with 13 of 27 economists surveyed by Bloomberg News. A majority, or 14, of the analysts expected the bank to hold the rate unchanged at 7.5 percent.

``The economy is expanding at a very strong pace and consumer demand continues to grow, fueling inflation concerns,'' Alvaro Camaro, head analyst at Bolsa y Banca brokerage in Bogota, said ahead of the bank's announcement. ``The bank needs to show it remains ahead of the curve.''

The central bank raised rates six times in 2006 from a three-year low of 6 percent to prevent the fastest economic growth since 1978 from pushing up consumer prices. Some analysts had expected the bank to hold rates to stem the appreciation of the peso.

``A higher interest rate attracts more foreign capital, pressuring the peso to strengthen further,'' said Carolina Tovar, an economist at Corporacion Financiera Colombiana SA.

Banco de la Republica began selling the country's currency for the dollars on Jan. 15 after the peso appreciated 15 percent in the second half of 2006, according to traders. The bank will buy dollars ``massively'' to stem the peso's gain, Banco de la Republica said in a statement today.

`Muscle'

The peso has gained also in part on expectations investors will bring dollars into the country to pay for state assets auctioned off in late 2006.

``We have financial muscle to intervene in the market,'' Finance Minister Alberto Carrasquilla, who also acts as president of the bank's board, told reporters.

To compensate for the additional pesos in the economy, the Treasury will deposit in Banco de la Republica about 5 trillion pesos ($2.2 billion) a year, Carrasquilla said. The bank doesn't need to sell local debt in the secondary market to absorb excess cash, he said.

Consumer prices in Latin America's fourth-biggest economy rose 4.5 percent in 2006, at the midpoint of the central bank's range of 4 percent to 5 percent, the country's National Statistics Agency reported Jan. 2. Banco de la Republica targets inflation of 3.5 percent to 4.5 percent for this year.

At their last meeting on Dec. 15, policy makers unexpectedly raised rates a quarter-point, a move forecast by four of 19 economists in a Bloomberg survey.

To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net

Last Updated: January 26, 2007 15:24 EST