PREVIEW-Colombia cenbank seen keeping rates fast

Mon Feb 22, 2010 2:14pm EST Related News FACTBOX-Global interest rates in 2010Mon, Jan 25 2010

* WHAT: Colombian central bank rate decision * WHEN: Friday, Feb. 26 REUTERS FORECAST: Poll found all 42 analysts surveyed forecast the bank willkeep its rate stable at 3.5 percent. The majority of theanalysts also forecast the bank will keep that rate unchangedthrough at least June. One third of the analysts forecast the bank"s benchmarkrate would end the year at 4.5 percent while 17 percent ofthose surveyed forecast a close of 4 percent. Another 12percent estimated the rate would end 2010 at 3.5 percent. FACTORS TO WATCH: Friday"s decision will most likely be to keep the rateunchanged as the factors in its last three decisions remain thesame. But the bank could give a more positive outlook and giveindications on when it could start to bring rates up. Inflationis still under control and Colombia"s economy is starting tosee moderate recovery. Recovering demand and inflationary expectations rising onthe economic growth will be signs the bank could change itspolicy. But there would need to be a major signal of improvedeconomic performance before the bank changes its position, saidDavid Duarte, Latin America strategist for 4CAST Incconsultants in New York. The bank could also comment on the impact from an ongoingdiplomatic crisis with Venezuela which has battered trade andalso the effect of the El Nino weather pattern that isthreatening more drought and could push up food prices andpressure inflation. MARKET REACTIONS: The market is not expecting any real surprises on Fridaywhen most analysts believe the bank will keep rates unaltered.Local TES bonds and the peso currency are not likely to see anymovement from the bank"s initial decision. In the medium and longer term, expectations the bank willraise its rate could generate pressure on the prices ofColombia"s peso-denominated public debt. (Reporting Nelson Bocanegra, writing by Patrick Markey inBogota; Editing by Andrew Hay)

Currencies&&&&Bonds

Currencies Bonds