BOGOTA (Reuters) – A further increase in Colombia’s benchmark interest rate may be necessary in the coming months as the country’s central bank tries to keep inflation at its 3 percent target, according to minutes of last week’s meeting.
The Central Bank of Colombia raised its benchmark interest rate last Thursday by 12 basis points to 10%, central banks around the world are raising interest rates as inflationary pressures and domestic consumption remain strong.
The country’s 12 monthly inflation reached 10.84%, the market expects August to rise to 25 .25 September percentage.
Those pressures could necessitate further interest rate hikes this year as banks try to push inflation back to their 3 percent target, according to minutes released Monday night.
” (the Board of Directors) noted that further increases in the benchmark interest rate may be necessary in the coming months, depending on the information available at any given time about the internal and external economic situation, and its prospects ,” the board said in the minutes.
Last Thursday, six of the seven board members voted to increase the rate by 100 basis points and one board member voted to increase the rate
basis points, which would bring it to 9.5%.
The only policymaker warned that the biggest risk from aggressive monetary policy tightening was a “deep deceleration” in production and employment, adding that additional interest rates would be detrimental to growth Have a bigger impact than inflation.
Inflationary pressures have not eased despite the benchmark interest rate hike last year 84 basis points.
“The upward trend in foreign interest rates requires a similar adjustment to domestic interest rates, for which (board members) observed that such high interest rates imply consumer mix , the production sector and government financing face considerable risks,” the minutes said.
Analysts polled predict that policymakers will raise interest rates to % by the end of the year.