(Corrects to show pace of inflation was below median estimate in third paragraph.)
Colombia’s peso bond yields fell the most since March as lower-than-forecast inflation fueled speculation that the central bank will reduce borrowing costs as soon as this month.
Yields on the government’s peso-denominated debt due in May 2014 dropped 23 basis points, or 0.23 percentage point, to 3.82 percent at 9:49 a.m. in Bogota, the lowest level on a closing basis since May 28, according to the stock exchange. The price rose 0.14 centavo to 103.565 centavos per peso.
The pace of annual consumer price increases quickened to 2.27 percent in August, the government said after markets closed yesterday, below the 2.34 percent median estimate of 23 economists surveyed by Bloomberg. Analysts projected accelerating inflation after protests by farmers and truckers in August pushed food prices higher.
Banco de la Republica, led by Governor Jose Dario Uribe, kept its overnight lending rate at 3.25 percent on Aug. 30. Policy makers said in a statement released with the decision that they aren’t ruling out the possibility of a reduction. The next meeting is Sept. 27. The central bank targets inflation of 3 percent, plus or minus one percentage point.
The peso rose 0.4 percent to 1,948.24 per U.S. dollar today and headed for a fourth straight weekly drop, depreciating 0.8 percent in the past five days.
Colombia’s Finance Minister Mauricio Cardenas, who has repeatedly said the peso’s “equilibrium” level is 1,900 to 1,950, said on Todelar Radio Sept. 3 that there is an “optimum point after which a weaker exchange rate starts to become a problem.”
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