Colombia sees no more rate reductions

Colombia's Finance Minister Oscar Ivan Zuluaga speaks during an interview with Reuters in Bogota May 4, 2010.

BOGOTA (Reuters) - Colombia's central bank is not likely to follow last week's surprise 50-basis-point interest rate reduction with another cut in the short term, Finance Minister Oscar Zuluaga said on Tuesday

Asked if the market should expect any more interest rate reductions, Zuluaga, a voting member of the central bank's monetary policy committee, said, "I don't think so."

The bank shocked the markets on Friday by cutting its main interest rate to 3 percent despite nearly unanimous expectations on Wall Street that policymakers would maintain the rate unchanged at 3.5 percent.

"It is getting to a low level and the last cut on Friday was a surprise for analysts and the market," Zuluaga said at Reuters Latin American Investment Summit. "With this reduction we are giving the economy the final push it needs to strengthen its recovery."

Most countries around the world are keeping rates on hold or are raising them while their economies recover from the crisis of 2008-2009. Brazil increased rates by 75 basis points on Wednesday to keep its economy from overheating.

Zuluaga said the cut was justified by low inflation and an economy that is lagging much of the rest of Latin America.

The government expects Colombia's gross domestic product to expand 2.5 percent this year while countries such as Peru, Argentina and even Chile, hurt by a big earthquake in late February, are seen growing 4 to 6 percent.

The world slowdown had caused private investment in Colombia to collapse in the last quarter of 2008. The central bank responded by chopping its key rate by 6.5 percentage points over a 12-month period starting in December 2008.

Since November 2009 the bank had left the rate at 3.5 percent until it delivered its surprise cut to 3 percent on Friday.

URIBE'S LAST BOND

The Andean country does not plan to tap the international capital markets before the next government is sworn in on August 7, Zuluaga said.

Last month the government of outgoing President Alvaro Uribe sold $800 million in peso-denominated global bonds, taking advantage of a rally in emerging markets debt to wrap up its 2010 financing needs.

"This government does not have any more debt operations planned for the international markets. We have finished with what we had planned for 2010's financing program," Zuluaga said. "Any further decision in this regard will be up to the new government."

Uribe, elected in 2002 and reelected in 2006, remains popular for his U.S.-backed crackdown on drug-running guerrilla fighters. The leading candidates in the May 30 election say they will maintain his largely successful security framework and free-market economic policies.

(Reporting by Hugh Bronstein; Editing by James Dalgleish)