- Decision
- Maintain
- Rate change
- 0 bps
- Benchmark rate
- 9.5%
Colombia’s Banco de la República kept its policy rate at 9.5%, with five of seven board members backing the hold and two preferring cuts of 25 bp and 50 bp respectively, citing a still-declining but sticky inflation path and lingering upside risks. December headline inflation was steady at 5.2% while core inflation eased to 5.2% as services inflation remained elevated at 7%; although price growth has fallen 8.1 ppt since March 2023 and is projected to converge towards the 3% target, pressures from faster producer-price gains, a sizeable minimum-wage hike and a rebound in inflation expectations pose challenges amid fiscal strains and exchange-rate volatility. The economy continues to recover, with staff estimating 2.3% y/y GDP growth in Q4 2024 and forecasting 1.8% for 2024 and 2.6% for 2025 alongside improving labour-market indicators. The board noted that external conditions could tighten further given new US policy directions, rising global long-term yields and a stronger USD, potentially adding inflationary pressure. Describing the decision as a “respite” in the easing cycle that started in December 2023, the directors said upcoming data will determine the pace and scale of future rate reductions while reaffirming their commitment to disinflation compatible with sustained growth.
Rate evolution
From June 2025 to July 2026, the policy rate rose by 275 basis points from 9.25% to 12.0%, after a prolonged hold through end-2025, two 100-basis-point increases in January and March 2026, an April pause, a 75-basis-point increase in June and a July hold. The extended hold reflected a cautious stance as headline inflation eased only unevenly and then picked up again, core inflation stopped falling, inflation expectations remained above the 3% target, and growth and domestic demand stayed firm, with consumption and investment strengthening. Risk language stayed cautious throughout, first emphasizing slower-than-expected inflation convergence, fiscal-deficit and public-finance concerns, and a wider trade and current-account deficit linked to strong imports, then acknowledging that external financial conditions had eased with United States rate cuts even as uncertainty around trade tensions, geopolitics and Colombia’s sovereign risk remained high.
In the most recent decisions, a sharp rise in expectations, renewed increases in headline and core inflation, resilient activity and a dynamic labor market prompted tightening, before the Central Bank of Colombia’s Board held the policy rate at 11.25% in April and raised it by 75 basis points to 12.0% on June 30, citing continued inflation pressures, domestic demand growth exceeding output growth, low unemployment and high external uncertainty. On July 31, the Board held the policy rate at 12.0% by a four-to-three vote, with three members favoring a 50-basis-point increase, as headline inflation rose to 6.1% in June, core inflation remained at 6.0%, and expectations for December 2026 and 2027 increased to 6.6% and 5.0%, respectively, while market-based expectations remained above 6.0% across all horizons. Available data pointed to stronger second-quarter activity, a 2.5% staff projection for 2026 growth and unemployment of 8.0% in June, while peso appreciation eased inflationary pressures and risks from the Middle East conflict and a possible El Niño event persisted. The Board said the decision maintained a restrictive stance consistent with inflation declining in 2027 and left future moves dependent on incoming information.