Colombia Peso Drops as Traders Pare Bets on Higher Interest Rate

  • Prices rose less than all 31 forecasts compiled by Bloomberg
  • Colombian peso is worst performer among emerging-market peers

Colombia’s peso fell the most in emerging markets after inflation surprised economists by slowing for the first time in almost a year, sparking bets that the central bank will raise interest rates less than investors previously expected.

Traders pared bets on further rate increases after the national statistics agency said inflation slowed to 7.93 percent in April from a year earlier, less than all 31 analysts in a Bloomberg survey had predicted. Three-month rate swaps fell 0.065 percentage point to 6.94 percent at 9:29 a.m. in Bogota. The peso weakened 0.6 percent to a three-week low of 2,972.85 per dollar.

The central bank has raised its policy rate by 2.5 percentage points since September as a severe drought caused food prices to spike while a weaker peso made import more expensive. Inflation slowed in April after reaching the highest level since 2001, its first decrease since May 2015.

Lower-than-expected inflation “may temper somewhat the more hawkish tendencies within the divided” central bank board, said Tiago Severo, an analyst at Goldman Sachs Group Inc. in New York. The central bank will probably raise rates by 25 basis points in May, with less than even odds of a follow-up move in June, Severo wrote in a report.

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