Nelson Bocanegra

BOGOTA, (Reuters) – Colombia’s central banks board may raise the benchmark rate by 100 basis point to 6% during its Friday meeting. This is in line with continuing hikes due to rising inflation.

Analysts haven’t ruled out an increase in borrowing costs in order to reduce inflation. They stood at 8.53 percent in March and are almost three times the target of 3% from the central bank.

In a recent Reuters poll, fifteen analysts surveyed agreed that the board of seven members will raise the rate to 6%. This is the highest level since May 2017.

The total increase in borrowing costs would be 425 basis point since September 2017.

Analysts said that the board could opt for an even greater rise since there was no May interest rate vote.

Camilo perez, Banco de Bogota’s chief economist said, “We expect to make a decision on 100 basis points, but we haven’t ruled it out for a move of greater magnitude principally since there is no May meeting.”

He added that “if you look back exactly one month prior to the meeting, that is when the rhythm accelerates.” This can be seen as anticipation, or preparation that involves a greater adjustment than a month in which there has been no monetary policy decision.

Although the board increased the rate 100 points in January, the majority of market participants had predicted 75 points. However, the increase in March was 100 points instead of the 150 point majority forecast. The February meeting was not held.

Markets will be also watching out for any changes in inflation projections by the bank technical staff, which could occur during the press conference after the interest rate vote.

Roberto Steiner, a bank board member, stated last week that inflation is unlikely to reach the 3% target within the next two-years. He predicted rate increases will continue.