- Decision
- Lower
- Rate change
- 25 bps
- Benchmark rate
- 9.25%
Colombia’s Banco de la República unanimously cut the policy rate by 25 bp to 9.25 percent, saying the step balances support for the economic recovery with the need to keep inflation converging toward the 3 percent target amid a renewed drop in headline inflation to 5.1 percent in March, softer core inflation at 4.8 percent and lower market-based inflation expectations. The move follows two meetings in January and March that held the rate at 9.5 percent after a rate-cut cycle that began in December 2023. First-quarter indicators point to 2.5 percent y/y GDP growth, and staff now see the economy expanding by 2.6 percent in 2025 and 3.0 percent in 2026, underpinned by stronger private consumption and investment. However, tighter global financing conditions, rising trade tensions and domestic fiscal uncertainty have lifted Colombia’s risk premium and are expected to weigh on external demand and commodity export prices. The Board signalled a cautious, data-dependent stance for future decisions.
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.