Colombia central bank expected to hold rate at 12% despite inflation risks

By Nelson Bocanegra BOGOTA, Sept 30 (Reuters) — Colombia's central bank board is expected to keep the benchmark interest rate unchanged at its meeting on Wednesday as it assesses the economic impact of an August earthquake, despite mounting inflation risks. 25%. The meeting will be the first rate decision attended by Finance Minister Miguel Gomez, who was appointed by recently inaugurated President Abelardo De La Espriella. If the rate is held, it would mark the second consecutive hold following increases in January, March and June that totaled 275 basis points.

"Despite inflationary pressures, the central bank is likely to pause, taking into account the impact of the earthquake on economic activity," said Carlos Alberto Velasquez, head of economic research at brokerage Alianza. A large swath of southwestern and central Colombia was hit by the powerful August 10 quake, which killed 335 people, injured thousands more and destroyed homes and infrastructure. Reconstruction is expected to cost at least 30 trillion pesos, about $9 billion, according to government estimates. 24% annually through August, more than double the bank's long-term 3% target.

Inflation could continue to accelerate because of the impact of the El Niño weather phenomenon on prices. Board member Olga Lucia Acosta told Reuters earlier this month the inflation rebound requires policymakers to reassess price pressures in order to determine how restrictive monetary policy should be, adding further action is still needed to steer inflation back toward target. The board's meeting comes after the US Federal Reserve raised interest rates this month, while the United Kingdom and Mexico kept borrowing costs unchanged and Brazil cut its benchmark rate. com)