PREVIEW-Colombia cenbank rate seen stable, eyes on peso

WHAT: Colombia’s monthly central bank policy meeting

WHEN: Friday, Oct. 29

OUTCOME: Bank seen keeping benchmark rate at 3 percent

REUTERS FORECAST:

A Reuters poll of 40 analysts found that nearly all
observers expected the central bank to leave its key interest
rate at 3 percent at its monthly meeting on Friday. Only two
analysts saw a reduction in the rate.

Of the observers surveyed, 27 said that they expected the
monetary authority to announce additional measures against the
surging peso currency, with the most probable move seen as a
control on capital inflows from external debt.

Looking longer term, nearly all of those polled estimated
the bank would keep its benchmark interest rate stable until
year end, and more than two-thirds think that the rate will
close 2011 between 4 percent and 4.5 percent.

FACTORS TO WATCH:

With the interest rate likely to remain unchanged, all eyes
will be on the bank’s remarks on the peso and possible measures
the board could announce to slow the currency’s rise. For more
details on possible measures, click [ID:nN15183902]

In mid-September, the monetary authority restarted a dollar
purchasing program of at least $20 million daily. President
Juan Manuel Santos said on Saturday that the government would
announce measures this week to help mitigate the impact of the
rising peso currency (COP=RR: ). [ID:nN23159856]

The government and the bank have been under pressure to do
more to control the strengthening currency. Other nations in
the region, such as Brazil and Peru, have also moved to curb
their currencies. For a Factbox on Colombia’s past
interventions, click [ID:nN24243857]

“Concerning foreign exchange measures, we don’t rule out
capital controls, especially for private external debt,” said
consultants EConcept in a note.

“However, to the extent that international conditions and
daily interventions by the central bank are able to keep the
exchange rate above 1,800 pesos per dollar, the probability of
placing those controls is reduced.”

MARKET IMPACT:

Maintaining the interest rate is unlikely to move the peso
or local peso-denominated TES bonds as the market will have
factored that into its trading options.

But there is a lot of interest in peso measures although
many players have already adjusted their positions to account
for likely moves by the government or central bank.
(Reporting by Nelson Bocanegra; Writing by Jack Kimball;
Editing by Frank Jack Daniel and Diane Craft)

PREVIEW-Colombia cenbank rate seen stable, eyes on peso