Colombia Holds Key Rate at 4.5% as Inflation Surge Continues

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Colombia kept borrowing costs unchanged for a ninth straight month after the central bank trimmed its growth forecast and inflation accelerated to the fastest pace since 2009.

The seven-member board voted unanimously to maintain the benchmark rate at 4.5 percent, central bank Governor Jose Dario Uribe told reporters Friday in Bogota after the meeting. The decision was forecast by all 31 analysts surveyed by Bloomberg.

“The Colombian economy is adjusting to the new external conditions in an environment of lower consumption and investment growth,” Uribe said, reading the policy statement. “Faster inflation is explained manly by the increase in food prices and, to a lesser extent, by the impact of the peso’s devaluation.

A surge in inflation and the widest current account gap in more than a decade are preventing policy makers from acting to reverse a slowdown in growth caused by lower oil prices. The central bank will hold rates for the rest of the year as it gauges the depth of the slowdown, said Camilo Perez, chief economist at Banco de Bogota, who correctly forecast today’s decision.

‘‘The current account deficit is wide, so they can’t cut,” Perez said in response to emailed questions. “It would be a mistake to raise rates, because the economy is weak and there is uncertainty over the scale of the deceleration.

Policy Balance

The current account deficit last year widened to 5.2 percent of gross domestic product, the most in more than a decade, as prices slumped for crude, Colombia’s biggest export. Finance Minister Mauricio Cardenas and central bank co-director Ana Fernanda Maiguashca have both cited the deficit as an argument against cutting rates.

Annual inflation accelerated to 4.64 percent in April, the highest rate after Brazil among the region’s major inflation-targeting economies. Policy makers have repeatedly said that faster consumer price increases are being driven by temporary increases in food and import costs.

Inflation will slow to 3.19 percent by the end of 2016, according to the most recent central bank survey of economists. Policy makers try to keep expected price increases ‘‘anchored” close to the inflation target, since these play a role in price-setting decisions and wage negotiations. Colombia targets inflation of 3 percent, plus or minus one percentage point.

In its quarterly inflation report published May 8, the central bank forecast that the economy will grow 3.1 percent or 3.2 percent this year, down from a previous forecast of 3.6 percent. That would be the nation’s weakest expansion since 2009, while outpacing the 0.9 percent growth that the International Monetary Fund forecasts for Latin America and the Caribbean as a whole.

The peso has weakened 24 percent over the last year, the biggest drop after the Russian Ruble and the Brazilian Real among major emerging market currencies.

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