The rate of interest rate in Colombia unexpectedly slowed due to signs that the economy's growth rate is cooling.
The benchmark rate was increased by one percentage point on Thursday to 10%, Governor Leonardo Villar told reporters in Bogota. Six board members voted for the move, while one argued for a smaller hike of half a percentage point.
The forecast for economic growth for the next year was cut to 0.7%, from 1.1%.
The bank said there are signs of deceleration in productive activity over the next few months. There are reductions in commodity prices because of the fears of a global recession. The decision may be a sign that the bank is nearing the end of the steepest series of interest rate increases in its history, which began a year ago when the key rate was 1.75%. The economy is projected to grow at the fastest pace of growth among major Latin American economies this year, led by strong domestic demand, before slowing down next year. The outlook for expansion was raised to 7.8% from 6.9% by the bank in 2022.
Mexico raised its policy rate three quarters of a percentage point to 9.25% on Thursday. Brazil's central bank brought an 18 month series of rate increases to an end this month, while Chile s central bank said interest rates may have to move significantly higher.
In August, Colombian inflation accelerated to a 23 year high of 10.8%, leading to a 26% increase in food prices. Economists surveyed by the central bank believe that the bank will end the year at 11.3%, more than triple the mid-point of the bank's target.
The government of President Gustavo Petro is going to phase out gasoline subsidies next month, which is why Colombian policymakers are bracing for an increase in fuel prices. Petro is expected to push through a large increase in the minimum wage, which would take effect from January.
The decision was predicted by 10 of 29 analysts surveyed by Bloomberg. Eighteen predicted a 1.5 percentage point increase, while one had expected a 1.25 percentage point.
Finance Minister Jose Antonio Ocampo took office last month, making it the first monetary policy meeting of the finance minister.