BOGOTA: Colombia's central bank on Friday raised its benchmark lending rate by 25 basis points for the third straight month on Friday, an increase aimed at containing a recent rise in still-low inflation after a surge in first quarter economic growth.
The seven-member policy-making board increased borrowing costs a quarter point to 4.00 percent, the first time the rate has been that high since January 2013, in a decision that came a day after strong 6.4 percent first quarter growth was announced.
The bank also extended and expanded its dollar purchasing program with a plan to buy up to $2 billion between July and September to bolster reserves and compound ongoing efforts to weaken the peso which the government says is too strong.
"We have ample and sufficient ammunition to take part in the foreign exchange market to avoid the peso being overvalued," Finance Minister Mauricio Cardenas, a member of the central bank's board, told reporters after the rate-setting meeting.
A Reuters survey of analysts on Monday showed that 20 of 23 expected the quarter-percent rate increase, but four switched their view on Thursday to a half-percent increase after the surprisingly strong growth data was released.
Friday's rate increase was the third quarter-point rise in as many months. Policymakers say smaller incremental increases to contain inflationary pressures early will avert larger monetary adjustments later on.
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