UPDATE 1-Colombia's central bank holds benchmark rate, will accumulate reserves

reserves@ (Adds comments by central bank chief, details on Colombia economy)

BOGOTA, Sept 28 (Reuters) - Colombia's central bank held the benchmark interest rate at 4.25 percent on Friday, as economic indicators, inflation expectations and growth estimates remain steady, and announced it will gradually accumulate international reserves via auction.

The unanimous decision dovetailed with the predictions of all analysts in a Reuters survey this week, who agreed borrowing costs will remain stable for at least the next six months because inflation projections for this year and next remain very close to the bank's target.

The rate has been held at 4.25 percent since April by the seven-member board.

"The board examined the weakness of economic activity and the uncertainty about the speed of its recovery, the stability of observed inflation and its anticipated levels of close to 3 percent," bank chief Juan Jose Echavarria said, reading from a statement by the board.

Twelve-month inflation to August was 3.1 percent, similar to last month's, below the same month last year, and near the long-term target of 3 percent, the board said.

Gross domestic product growth of 2.8 percent in the second quarter was similar to what the bank had predicted, the board said, and indicators suggest expansion in the third quarter will also be low.

"The average growth of the country's trading partners remains dynamic, marked mainly by the developed economies. The international price of oil and the terms of trade continued to increase and continue to boost national income," the board said in the statement.

The bank estimates the Andean country's economy will grow by 2.7 percent this year.

Analysts say the interest rate will be increased sometime around March 2019 because of growth acceleration in Latin America's fourth-largest economy.

The bank will gradually sell "PUT" options, it said in a separate statement, in a bid to accumulate international reserves in preparation for a possible reduction in 2020 of its $11.5 billion credit line with the International Monetary Fund.

The auctions will take place monthly beginning Oct. 1 and the first will have a quota of $400 million. The statement did not say what the total accumulation would be.

"The mechanism that will be used to acquire the reserves will be the 'PUT' option auction, which can only be exercised when the exchange rate is below its recent average," the board said. "This prevents purchases in periods of upward pressure on the exchange rate."

Colombia currently has international reserves of $47.7 billion and last accumulated reserves through auction in May 2008.

(Reporting by Nelson Bocanegra and Julia Symmes Cobb in Bogota Editing by Tom Brown and Matthew Lewis)