By Nelson Bocanegra
BOGOTA, April 23 (Reuters) - Colombia's central bank will hold its benchmark interest rate steady for the seventh month running in April to continue supporting the country's economic recovery, but the market majority now expects rates to rise before the end of the year, a Reuters poll revealed on Friday.
All 16 analysts forecast that the monetary policy authority will leave the rate untouched at 1.75% at its meeting in a week's time.
Interest rate stability comes at a time when annual inflation sits at 1.51%, well below the bank's 3% target, and when economic activity is gradually raising its head amidst the coronavirus pandemic.
"This month we expect the authority will keep the rate unaltered, giving continuity at its expansive posture which favors economic recovery," Carlos Alberto Velasquez, chief of economic studies at the bankers association, Asobancaria, said.
However, analysts have begun to see inflationary pressures which would support raising the interest rate, due to economic recovery and the potential removal of sales tax exemptions as part of a tax reform the government has sent to congress and which, if passed, would come into force next year.
"Given our expectation of a gradual improvement in economic conditions in the months ahead, we continue to expect a gradual rotation in policy, from a relatively modest dovish stance toward a decisively neutral-cautious bias in forthcoming meetings" said Andres Abadia, chief Latin America economist at Pantheon Macroeconomics.
"We expect the first rate increase during the fourth quarter, or early next year", he added.
In the poll, 40% of analysts forecast the bank will keep the interest rate stable during the rest of the year, compared with 58% of analysts in a poll in March.
Subsequently, 60% of analysts estimated that the benchmark interest rate will rise to between 2% and 2.5%.
(Reporting by Nelson Bocanegra Writing by Oliver Griffin Editing by Marguerita Choy)
((Oliver.Griffin@thomsonreuters.com; +57 304-583-8931;))
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