Nelson Bocanegra

BOGOTA, (Reuters) – The Colombian central bank board will likely raise the benchmark rate to 3% by 50 basis points this week. This is in an effort to reduce inflation above target.

One survey revealed that twenty-one of 21 analysts believe that a one-half-point increase in the annual board meeting will be supported by the majority of seven policymakers, though others will back a gradual 25 basis-point rise.

The half-point increase will mean that the interest rate has been increased 125 basis points by September’s start to a new cycle of increases.

Broker Alianza Valores stated in a report that “taking into account the fact that the total inflation stands at 5.26%” and additional inflationary pressures will occur in the next months, we expect central bank to raise the rate by fifty basis points.

It added that “Notwithstanding this, there’s a chance the increase could reach 75 basis points with a split vote.”

In November 2012, consumer prices increased by 5.26 percent. That’s well over both the expectations of the bank and their long-term target rate at 3%.

Analysts said that the board would likely back another rate increase in January. The rate will then end at 5% next year, according to the median survey estimates. This is due to inflationary pressures continuing and difficulties in global supply chains.

The central bank projects that the Colombian economy will expand 9.8% this year and slow to 4.7% growth in 2022.