Colombia's central bank poised for second straight rate hike amid persistent inflation
Most analysts predict a 25 basis point increase to 12.5%, though 13 forecasters expect a hold pending mid-November economic data.
By Justin Brooks ·
The Bank of the Republic of Colombia faces a decision on Friday that will determine whether its tightening cycle continues. Inflation remains more than double the central bank's target, creating pressure to raise borrowing costs despite a slowing economy. The board must balance the need to anchor price expectations against the risk of stifling investment.
Seventeen of the 31 analysts surveyed by Reuters this week forecast a 25 basis point increase to 12.5 percent. One analyst projected a larger jump of 75 basis points to 13 percent. The remaining 13 analysts expect the board to keep the rate unchanged at 12.25 percent. These forecasters argue that policymakers should wait for third-quarter economic performance figures due in mid-November, which are expected to show signs of a slowdown.
Colombia's central bank raised rates last month. A hike this week would mark the second consecutive monthly increase. Cumulative increases in 2026 would reach 325 basis points. If the majority forecast holds, the year would close with the benchmark rate at 12.5 percent, making Friday's decision the final adjustment for 2026.
Annual inflation in Colombia reached 6.29 percent through September. This rate is well above the central bank's 3 percent target. The country is on track to miss the target for a sixth consecutive year. Bancolombia noted in a report that high inflation and upside risks, along with a difficult fiscal situation, support a rate increase.
Davibank pointed to specific risks that keep pressure on the inflation outlook. The bank cited uncertainty over the impact of the El Niño weather phenomenon and ongoing minimum-wage negotiations. Davibank also observed that inflation has not yet shown the typical end-of-year acceleration.
Laura Moisa, a board member of the Colombian central bank, told Reuters this month that raising rates now might not impact inflation as effectively as it would at other times. She noted, however, that the decision could affect investment decisions. The move follows similar actions by the US Federal Reserve and Chile's central bank, both of which kept their benchmark rates unchanged this week.
The central bank will not hold a monetary policy meeting in November. The next scheduled vote on the interest rate is in December.
Source: KOYY
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