BOGOTA, (Reuters) - Colombia's central bank held the benchmark interest rate at 9.5% on Monday, surprising the market, which expected policymakers to resume cuts to borrowing costs despite inflation pressures and a difficult fiscal situation.
The decision was backed by four of the seven members of the board. Three board members voted for a 50-basis-point cut.
There were important increases in prices for processed foods and some regulated items like gas and transport, the board said in a statement, and year-end estimates for inflation remained above the bank's long-term 3% target.
"The risks of inflation pressures persist, associated with fiscal challenges and external uncertainty," the board said.
The bank's technical team increased its gross domestic product estimate for this year to 2.8% from 2.6% previously, the statement said.
"All the members of the board consider that the rate today is a restrictive rate and because of that the expectation we have going forward is that we will have a very low interest rate and that we can adopt decisions to reduce the rate in the next meetings," board chief Leonardo Villar told journalists.
Sixteen of 21 analysts polled by Reuters in a recent survey predicted the monetary authority would cut its benchmark interest rate by 25 basis points to 9.25% this month, while one analyst forecast a larger 50-basis-point cut to 9.00%.
The remaining four predicted the rate would be maintained at 9.50%.
Monday marked the first interest rate votes by Laura Moisa-Elicabide and Cesar Giraldo, who were recently named to the seven-member board by President Gustavo Petro, and by new finance minister German Avila, who told journalists last week he would opt for a rate cut.
The board decided by majority to hold the rate at its last vote in January, the first pause since a reduction cycle began in December 2023.
According to the Reuters survey, the benchmark rate will end this year at 7.75%, compared to the 7% predicted in the previous survey.
Reporting by Nelson Bocanegra and Carlos Vargas; Writing by Julia Symmes Cobb; Editing by William Maclean and Bill Berkrot
Source: Reuters