April 4, 2018 / 9:38 PM / a year ago

Prudence needed in Colombia policy amid possible food price rise: central bank

FILE PHOTO: A man buys vegetables and fruits in Cali, Colombia January 4, 2018. REUTERS/Jaime Saldarriaga

BOGOTA (Reuters) - Colombia’s central bank has not ruled out the possibility of increases in food prices in the second half of the year, it said in a report to lawmakers on Wednesday, and prudent monetary policy is required to meet the inflation target.

Though the bank said consumer prices will end the year up 3 percent - the mid-point of the bank’s 2 to 4 percent long-term target range - food price upticks could delay inflation decreases.

“We should not rule out the possible rises in food prices toward the second half of 2018, either because of fewer crops or the effect of climate changes,” the bank said in the report to Congress.

“It is indispensable to be prudent with monetary policy, in order to continue offering a boost to the recovery of economic activity without compromising the inflation target,” the report said, adding the current interest rate of 4.5 percent is moderately expansive.

Analysts predicted in a March survey that the bank’s seven-member board would cut interest rates by 25 basis points to 4.25 percent at its April meeting, to help bolster economic growth toward the bank and the government’s 2.7 percent prediction for the year.

Reporting by Nelson Bocanegra; Writing by Julia Symmes Cobb; Editing by Matthew Lewis

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