Nelson Bocanegra & Julia Symmes Cobb

BOGOTA (Reuters – Colombia’s central banking board increased the benchmark rate to 5% by 100 basis points on Thursday. This is significantly less than was expected despite continued inflation increases.

Five policymakers backed the increase of 100 basis points, while the rest voted for an increase of 150basis points.

Also, this year’s economic growth forecast was increased by the board to 4.7% from 4.3%.

In a Reuters poll, 13 out of 16 analysts said that the board of seven would increase borrowing costs by 150 basis point. Others warned later that increases could rise to 200 basis points. This is in response to rising inflation.

The bank reported that February’s twelve-month inflation was 8.01%, almost three times its long-term target of 3%. In the statement, the board noted that food prices rose by 23.3% in the last month.

Jose Manuel Restrepo from Finance, representing the government, stated that the decision was prudent given current economic behavior and the uncertainty in international markets. He also said that it is necessary to increase employment.

He said, “It’s a wise decision to try to limit the rise in price expectations but also to avoid that it could go against significant achievements in terms growth and job creating.”

According to the statement, Russia’s invasion in Ukraine could increase pressure on oil prices, as well as energy and agricultural supplies. Russia calls its actions in Ukraine a “special operation”.

All around the globe, central banks struggle to contain inflation caused global supply-chain issues and invasion.

According to some analysts, the board could raise its interest rate up to 8% before year’s end.

After achieving a record low borrowing cost of 1.75% in the midst of the coronavirus pandemic, the board started rate increases in September.