BOGOTA — Colombia’s central bank board raised the benchmark interest rate by 50 basis points to 3% on Friday, as policymakers look to tamp down rising inflation amid a recent increase in the minimum wage for next year.

The seven-member board was once again divided on how sharply to increase the rate, with four policymakers backing a half-point uptick and the remainder backing a 75 basis-point increase.

Central banks around Latin America are sharply hiking rates. Mexico raised its rate by a surprise 50 basis points on Thursday, also on inflation concerns, while Chile raised its borrowing costs by a 20-year high of 125 points and Brazil increased its by 150.

Colombia’s bank revised its inflation projections for this year and next, raising the 2021 estimate to 5.3% from a previous 4.9% and the 2022 projection to 3.7% from 3.6%.

Inflation reached 5.26% in the 12 months to November, well above the bank’s long-term 3% target, and may increase further after the government approved a minimum wage increase of 10.07% for 2022.

“The central bank reiterates its commitment to the inflation target of 3% per year, and will continue to take the decisions required to ensure inflation moves towards that target,” the board said in a statement.

The uptick in the minimum wage, nearly three times the raise implemented for this year, is a great challenge board chief Leonardo Villar said.

“The increase in the minimum wage creates a particularly strong challenge for the central bank and for the fulfillment of its constitutional mandate to maintain a stable and low inflation,” he said.

The rate decision was in line with predictions by analysts in a Reuters survey last week and takes rate rises to a total of 125 basis points since September. The government raised its growth projection for 2021 to 9.7% this week, though it remains below the central bank’s prediction of 9.8%. — Reuters

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