UPDATE 2-Colombia cenbank keeps key rate at 3.5 percent

* Decision to keep policy rate at 3.5 pct was unanimous

* Market expects rate increases to start at mid-year
(Adds analyst quote, context)

By Javier Mozzo

BOGOTA, Jan 29 (BestGrowthStock) – Colombia’s central bank left its
key interest rate unchanged at its monthly policy meeting on
Friday in a unanimous decision that was widely expected by
investors.

Since December 2008, the bank had cut the country’s policy
rate to 3.5 percent from 10 percent in a bid to spur an economy
walloped by fallout from the world financial crisis.

“With the information that we have up until today, with
which we decided to keep the rate unchanged, we feel
comfortable,” bank director Jose Dario Uribe Uribe told
reporters following the meeting, adding that the policy board’s
vote was unanimous.

The bank will start to raise the rate in June toward 4.5
percent by the end of this year, according to the average
prediction in a central bank poll earlier this month, as the
country’s economy is expected to recover in 2010. For analysis,
see (ID:nN26196723).

The government, in the weeks ahead, hopes to report slight
expansion in gross domestic product for last year. Policymakers
see economic growth of 2.5 percent in 2010, despite a slow
labor market recovery and an announced cut in government
stimulus spending.

A months-old trade freeze with neighboring Venezuela,
stemming from a diplomatic dispute over Colombia’s close
military relationship with the United States, is also weighing
on the economy.

“We expect the economy to record virtually no growth in
2009 and to grow at a below trend 3.1 percent in 2010,” Alberto
Ramos, who analyzes Colombia for Goldman Sachs, said after the
decision. “The outlook for activity is still beset with risks
given the expected weaker fiscal impulse and the virtual loss
of the important Venezuelan export market.”

“We expect the central bank to leave the policy rate
unchanged at the current 3.5 percent until at least the second
half of 2010, with a non-negligible probability that the policy
rate could remain unchanged throughout all of 2010,” Ramos
added.

Stock Money

(Reporting by Javier Mozzo, writing by Hugh Bronstein;
editing by Jeffrey Benkoe)

UPDATE 2-Colombia cenbank keeps key rate at 3.5 percent