Colombia's central bank raised its benchmark intervention rate for the fourth time in a row, as expected, saying demand is strong, credit growth is rising and real interest rates are at levels that are driving up spending.
The Central Bank of Colombia raised its policy rate by another 25 basis points to 4.25 percent and has now raised its rate by a total of 100 basis points since April to curb inflationary pressures.
The central bank also raised its 2014 growth forecast to between 4.2 and 5.8 percent, with 5.0 percent the most likely figure, sharply up from its March forecast range of 3.3 to 5.3 percent, with likely growth of 4.3 percent.
The increase in the growth forecast came after first quarter growth was higher than expected, partly due to consumption and investment in the construction of civil works and buildings, and the central bank expects this to continue the rest of the year.
"Additionally, consumer confidence has improved, the slowdown in consumer credit has stopped, retails sales continue to show strong dynamism and the unemployment rate has shown a downward trend. All the suggests that real household spending will continue to remain dynamic this year," the central bank said.
Colombia's Gross Domestic Product expanded by a higher-than-expected 2.3 percent in the first quarter from the previous quarter for annual growth of 6.4 percent, up from 5.3 percent.
Colombia's headline inflation rate eased to 2.79 percent in June from 2.93 percent due to changes in food and regulated prices, but the central bank said inflation expectations one year ahead remain near or slightly above 3.0 percent.
The central bank targets inflation at a midpoint of 3.0 percent in a range from 2.0 to 4.0 percent.