(Bloomberg) -- Colombia’s central bank slowed the pace of monetary tightening and signaled that interest rate rises are nearing an end as the economy’s growth outlook dims.

The bank lifted its benchmark rate by three quarters of a percentage point to 12.75% on Friday, governor Leonardo Villar told reporters after the meeting. Five of the seven-member board voted for the move, while two argued for a smaller increase, of a quarter percentage point. 

The decision was predicted by nine of 28 analysts surveyed by Bloomberg. Sixteen forecast a bigger rise of one percentage point, while three predicted a smaller move.   

“With today’s decision, monetary policy is nearing the stance required to cause inflation to slow to its 3% over the medium term,” Villar said. 

The hike is expected to be among the last in the bank’s steepest-ever series of interest rate rises, which began a year and a half ago. In recent weeks, the central bank got some help in its inflation fight from currency markets as the peso rebounded after diving between June and November. 

Brazil and Chile have already halted interest rate rises, while Mexico and Peru are forecast to do so in the near future. 

Read more: Chile Central Bank Chief Signals Longer Wait Before Cuts

Economic activity and retail sales data show growth cooling, as interest rates for consumers and home buyers are continuing to adjust higher after a year and a half of interest rate hikes. 

The bank cut its 2023 growth forecast to 0.2% from 0.5%. That’s down from an estimated expansion of 8% last year.  

Regional Outlier

While inflation has slowed in Brazil, Mexico, Peru and Chile in recent months, in Colombia it has continued to accelerate away from its target. Crop damage from heavy rains, a phasing out of gasoline subsidies and a 16% minimum wage rise are all adding to pressure on the central bank.  

Consumer prices rose 13.1% last year, the fastest pace in nearly a quarter of a century, with further acceleration forecast in the first quarter. 

What Bloomberg Economics Says

“Forward guidance kept the door open for more hikes if new data warrant, but anticipated the tightening cycle is nearing its close. The decision and revised growth forecasts show officials are growing concerned about the impact of high interest rates on the growth outlook.”

— Felipe Hernandez, Latin American economist

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After slumping last year, the peso has pared losses so far in 2023. The currency has rallied 6% this year, the most among major emerging markets after the Russian ruble. 

Friday’s board meeting was the first for recently-appointed co-director Olga Lucia Acosta. 

--With assistance from Martin Keohan.

(Adds comment from Bloomberg Economics)

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