Colombia's inflation rise likely to keep interest rates on hold

BOGOTA, March 10 (Reuters) - Colombia's inflation rose more than expected in February, likely keeping policymakers inclined to hold interest rates steady at their March meeting, analysts said on Monday.

Consumer prices increased 1.14% in February, above the 1% forecast in a Reuters poll, while annual inflation reached 5.28%, still far from the central bank's 3% target.

"Given that inflation accelerated for the second month in a row, we are projecting that the central bank will maintain the interest rate at its March meeting and resume the rate-cutting cycle as we see more favorable signs," said Jackeline Pirajan, chief economist for Colombia at Scotiabank.

This contrasts with a Citi survey from late February, where 20 out of 23 analysts, including Scotiabank, predicted a 25 basis point rate cut to 9.25% on March 31.

In January, the central bank surprised markets by holding the rate at 9.50%, marking the first pause in the rate-cutting cycle that began in December 2023, citing inflationary pressures and fiscal uncertainty.

Some analysts still foresee a 25 basis point cut in March, following recent changes to the bank's board, appointed by President Gustavo Petro. "With the new board composition, we expect a rate cut this month," said Andrés Pardo of XP Investments.

Meanwhile, Daniel Velandia of Credicorp Capital raised his year-end rate forecast to 8%, up from 7%, with further gradual cuts expected.