By Nelson Bocanegra and Carlos Vargas
BOGOTA (Reuters) -Colombia’s central bank on Friday held the benchmark interest rate at 13.25% for the third time in a row, citing stubborn inflation that, while slowing, remains high and far from the bank’s target, despite government calls to begin cuts
The decision to keep borrowing costs at 13.25% was backed by five of the seven board members. Two of the members backed a cut of 25 basis points.
All 21 analysts surveyed forecast the bank would hold the rate stable as it has done since June due to stubborn inflation. The board in June ended a tightening cycle during which it hiked the benchmark interest rate by 1,150 basis points.
“The majority of the board considers that, with the information available, it is not prudent to begin a process of reducing interest rates,” bank board chief Leonardo Villar said in a statement, adding that inflation remains persistent and that consumer price growth in August was higher than expected.
While Colombia’s 12-month inflation through August slowed to 11.43%, the metric remains almost four times the bank’s 3% goal. A Reuters poll on Friday found the median forecast from 16 analysts put 12-month inflation through September at 10.98%.
The analysts also forecast Colombia’s inflation would end 2023 and 2024 at 9.30% and 5.10% respectively.
The split decision follows comments last week from board members Roberto Steiner and Finance Minister Ricardo Bonilla, who represents the government on the board.
Bonilla said he would push for a rate cut in the meeting, while Steiner said a cut would be imprudent.
Colombia’s President Gustavo Petro lamented the decision and hoped cuts would come soon.
“I hope that during the next meeting the interest rate falls,” Petro said at a government event. “With this high interest rate, the highest in a long time, we are sacrificing important and as it turns out, employment is more important.
The central bank is an independent institution.
The central bank’s technical team expects Colombia’s economy to grow 0.9% this year, versus an expansion of 7.3% in 2022.
Analysts who do expect rate cuts this year suggest they will be less pronounced than previously forecast. According to the median, the rate is expected to finish this year at 12.5%, about 100 basis points higher than estimated in last month’s survey.
(Reporting by Nelson Bocanegra and Carlos VargasWriting by Oliver Griffin; editing by Timothy Gardner and Cynthia Osterman)