Colombia central financial institution prone to increase price to 11% on excessive inflation

© Reuters. FILE PHOTO: Common view of Colombia’s central financial institution in Bogota, Colombia October 9, 2019. REUTERS/Luisa Gonzalez/File Photograph

By Nelson Bocanegra

BOGOTA (Reuters) – Colombia’s central financial institution is prone to increase borrowing prices to 11% on Friday at its penultimate assembly of the yr, in tandem with policymakers world wide who’re making an attempt to fight excessive inflation.

Twelve of 14 analysts in a latest Reuters survey mentioned the seven-member board will improve the benchmark price by 100 foundation factors, whereas one analyst predicted a 75 foundation level rise and one other projected a 50 foundation factors uptick.

If the bulk prediction is met, it might be the very best price since July 2001.

“We count on 100 foundation factors for the assembly, however we expect extra improve within the rate of interest is required as a result of inflation retains rising,” mentioned Camilo Perez, chief economist at Banco de Bogota, who predicts one other price rise of fifty factors on the December assembly.

Inflation was up 11.44% year-on-year by means of the top of September, practically 4 occasions the financial institution’s long-term 3% goal. Analysts predict it should take past 2023 for the determine to return to the goal.

“This cycle of financial coverage is essentially the most aggressive we have registered this century,” Perez mentioned.

The financial institution has elevated the speed by 825 foundation factors for the reason that begin of this cycle in September 2021.

Finance Minister Jose Antonio Ocampo, who represents the federal government on the board and considers excessive inflation to be a supply-side downside, mentioned final week it might be troublesome to not increase the speed in firm with different central banks.

Ocampo on Wednesday requested the financial institution to debate liquidity in futures markets on the Friday assembly.

Some analysts haven’t dominated out doable forex interventions by the financial institution amid a deep depreciation of the Colombian peso brought on by worldwide uncertainty and market reticence towards guarantees by the leftist authorities to implement a $4 billion tax reform and bar new oil contracts.

In the course of the coronavirus pandemic the financial institution authorized greenback auctions through forwards and swaps.