Colombia lifts key rate to most since 2009

Bloomberg

Colombia raised interest rates to the highest level since 2009 as a slump in the peso adds to inflationary pressure in Latin America’s fastest-growing major economy.
The central bank increased its benchmark rate by 1.5 percentage points for a second straight month, to 9%, governor Leonardo Villar told reporters after the meeting.
Six board members voted for the move, while one voted for a smaller increase of one percentage point.
“The excess of demand continues, with economic activity that remains strong,” Villar said, reading the bank’s statement. “World inflation has continued to increase, and acquired a greater persistence.”
The decision was in line with expectations. The bank also raised its economic growth forecast for this year to 6.9%, from 6.3%.

Central banks across Latin America are tightening monetary policy to try to rein in the biggest inflation shock in two decades, which has been aggravated by soaring food and fuel prices caused by Russia’s invasion of Ukraine. The US Federal Reserve this week raised its policy rate by three quarters of a percentage point for a second straight month.

Economists are split over whether Colombia’s decision will be the final one in its phase of monetary tightening which began last September.

The nation’s annual inflation rate rose to 9.7% last month, its highest since 2000. The peso weakened to a record low against the dollar this month as risk-averse investors ditched emerging market assets. Some investors are also worried about the incoming government of President-elect Gustavo Petro, who takes office on Aug. 7.