BOGOTA, Nov 23 (Reuters) - Colombia's central bank unexpectedly cut its benchmark interest rate on Friday to counter an economic slowdown due to global economic uncertainty and weaker domestic demand.
The seven-member board voted to reduce the lending rate a quarter point to 4.50 percent - surprising economists - in a bid to boost 2013 growth amid weakness in the Andean nation's industrial sector and exports.
In a Reuters survey on Wednesday, 26 of 29 economists expected the central bank to maintain the overnight lending rate for the third straight month. The remaining three analysts saw the 25 basis-point cut.
'The weakness of the global economy and the decline in domestic demand has been reflected in lower export growth and contraction in industrial production,' central bank chief Jose Dario Uribe said after revealing the rate decision.
The vote to cut the interest rate was not unanimous and came after analyzing domestic spending in Latin America's fourth-biggest economy, and how much that may be able to offset a slowdown in growth during the second half of 2012.
A second month of contracting industrial production set off alarms that weak overseas demand for Colombia's manufactured goods may put pressure on factories just when Colombia's jobless rate is falling and a strong currency is hurting exporters.
Industrial output has dropped in five of the last seven months, ending with a 1.3 percent decline in September.
'This reflects the risks that are beginning to materialize in terms of economic growth and concern about developments on an international level,' said Daniel Velandia, director of economic studies at brokerage Correval in Bogota.
'This sends a message that there is less confidence in terms of economic behavior in the coming months.'
Finance Minister Mauricio Cardenas, who represents the government on the central bank board, on Wednesday called the industrial sector 'stagnant' and indicated he would support a reduction in borrowing costs to help spur expansion.
At the bank's October meeting, some board members sought a rate cut, arguing that inflation was under control and a deceleration in economic growth in the third quarter was likely.
Inflation expectations remain near the midpoint of the bank's 2 percent to 4 percent target.
Annual consumer prices in October reached 3.06 percent, lower than 3.08 percent in the previous month. The government will release data for November on Dec. 5.
(Reporting by Helen Murphy, Nelson Bocanegra and Jack Kimball; editing by Andrew Hay) Keywords: COLOMBIA RATES/CUTS
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