By Nelson Bocanegra
Colombia's central bank raised its benchmark interest rate on Tuesday to 12%, again upping rates in a cycle kicked off in January in a bid to curb inflationary pressures amid a spat with the government over rate hikes.
The 75-basis-point increase was backed by a majority of the seven-member board.
Four members voted for the increase, one voted to hold the rate and two more voted to cut it by 50 basis points.
Analysts had broadly expected a rate hike but were divided on the size of the increase, with forecasts ranging from 11.75% to 12.25%.
The seven members of the central bank's board unanimously kept the rate stable at the previous meeting in April.
The market saw that decision as an attempt to avoid escalating controversy between the institution and President Gustavo Petro, who has criticized the interest rate hikes, before the May 31 presidential election.
Right-wing candidate Abelardo De La Espriella won by a tight margin in the June 21 runoff, just ahead of left-wing candidate Ivan Cepeda.
The increase adds to hikes in January and March, each of 100 basis points, which sparked backlash from Petro and Finance Minister German Avila, who had threatened not to return to the bank's meetings on behalf of the government.
Avila said that the government believed the rate hike on Tuesday was "not the correct decision" and that he was one of the two members to vote for the 50-basis-point cut.
Central bank head Leonardo Villar said projections from the monetary authority's technical team suggest that inflation could reach around 4% by the end of 2027, up from a prior forecast of 3.7%.
Villar said the projections indicated that inflation could meet its 3% target in 2028.
Latin America's fourth-largest economy posted annual inflation of 5.84% at the end of May.
Analysts in a Reuters poll published earlier on Tuesday showed inflation expectations for the end of 2026 rising to 6.60% from a previous estimate of 6.50%, which would put out of reach of the central bank's target for a sixth straight year.