The Central Bank of Colombia’s Board of Directors raised the monetary policy rate by 25 basis points, maintaining a restrictive stance as headline and core inflation moved further above the 3% target. Headline inflation increased to 6.2% in August, driven by food and regulated items, while services inflation reached 7.2% and core inflation rose to 6.1%, its highest level since June 2024. Analyst and market expectations also remained above target, with expectations for December 2026 reaching 6.8%. The majority supported the increase because inflation pressures had spread across the consumer basket and could intensify through El Niño, higher energy costs and increases in oil and agricultural input prices linked to the Middle East conflict. These directors also cited excess demand, rising imports and tighter international financial conditions as upside risks. Directors favoring no change argued that the existing stance was already highly contractionary, monetary tightening operates with lags and much of the inflation persistence reflects components with limited short-term sensitivity to interest rates. A separate director backed a 50-basis-point increase, arguing that stronger action could reduce the risk of a longer tightening cycle. Upcoming decisions will depend on inflation developments and new information about El Niño, earthquake recovery and fiscal policy measures. The adopted stance remains consistent with an expected decline in inflation during 2027.
Central Bank of Colombia raises policy rate by 25 basis points as inflation pressures broaden
The Central Bank of Colombia raised its policy rate by 25 basis points after headline inflation reached 6.2% and core inflation rose to 6.1%. The divided Board weighed broadening price pressures and unanchored expectations against monetary policy lags and the costs of further tightening. El Niño, earthquake recovery and fiscal measures will inform upcoming decisions.