Nelson Bocanegra

BOGOTA (Reuters – Colombia’s central banks will increase its benchmark interest rates by the most significant uptick since more than 20 years, according to analysts polled by Reuters on Friday. The move is part of a push for controlling inflation.

13 of 16 analysts predicted that the bank board would raise borrowing costs 150 basis points, to 5.50%. Two other forecasts projected an increase in borrowing costs of 125 basis point and one a 100-point increase.

The increase in activity would be the greatest since November 1999 if the seven policymakers followed the majority projection.

Markets expect consumer prices to rise further, exceeding the February figure of 8.1% (12 months), which is far below the bank’s long-term goal rate of 3.3%.

Esteban Tamayo from Citibank said, “In this context it needs to make decisions…and keep accelerating the rate.” I expect it to be increased 150 basis points at next week’s meeting and the same amount in April.

Roberto Steiner from the Bank Board stated that February inflation data surprised almost everyone.

Analysts expect that the board will raise its rate to 7.5% before the end, well ahead of the 5.7% estimate from the poll.

Wilson Tovar is Acciones and Valores’ head economist. He stated, “Recent pressures on global and local inflation force the central bank into more proactive management amid inflation that will never stop rising.”

Tovar explained that even though growth is important, it’s more risky to act timidly than the economic health of the country. He also said that the bank could lose its credibility if they continue at a slower pace.