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BOGOTA, Aug 3 (Reuters) – Colombia’s central bank technical team is forecasting a higher benchmark interest rate than market expected due to heightened inflationary pressures and stronger-than-expected economic growth, she said Wednesday.
The bank’s seven-member board, like policymakers around the world, has raised borrowing costs to fight inflation.
They raised the benchmark borrowing rate to 9% last week, its highest level since February 2009.
Analysts in a Reuters survey and a bank poll predicted last week’s decision will mark the end of rate hikes.
“The median of the change in the interest rate expected by analysts was up compared to the previous report: 9% for the end of 2022 and 7.8% for the end of 2023”, specify the technical teams in their quarterly report.
“The technical team’s projected rate trend has similar dynamics but is on average higher than analysts,” he added.
The team’s estimates don’t necessarily reflect the thinking of policymakers, she said.
The team’s higher benchmark rate forecast is based on stronger than expected economic growth amid inflationary pressures and the risk that price increases will remain above the medium-term objective.
The technical team raised its inflation outlook for this year to 9.7% from its previous estimate of 7.1%. It also raised its inflation estimate for 2023 to 5.7% from 4.8% previously.
Colombia’s 12-month inflation hit 9.67% in June, its highest level since 2000 and more than triple the bank’s 3% target.
“The data shows growth in GDP and in particular private consumption which remains surprisingly high,” Hernando Vargas, the head of the technical team, told a press conference.
“Inflation will start to decline in the fourth quarter of 2022 due to the dilution of supply shocks, especially for food prices,” he added.
Analysts predicted in a Reuters poll last week that inflation would hit 9.98% in July. Read more
Reporting by Nelson Bocanegra, additional reporting by Carlos Vargas Writing by Julia Symmes Cobb Editing Lincoln Feast
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