Colombia Interest Rate

Central Bank unexpectedly holds rates

Bank stands pat: At its meeting on 31 July, the Central Bank (Banrep) held the policy interest rate at 12.00% after hiking by 75 basis points in the prior meeting. The decision surprised market analysts, who had anticipated a hike. The rate currently sits at the highest level in over two years.

Banrep opts for wait-and-see approach amid inflation risks: Though inflation remains above the Central Bank’s 3.0% inflation target and inflation expectations were persistently elevated, the Banrep did not opt for a further hike. This was likely due to recent currency strengthening, plus a desire to assess the impact of past monetary tightening, the Middle East conflict and the El Niño weather event.

Rate hikes likely to continue this year: Although the Central Bank provided no forward guidance, most of our panelists still expect an additional 25 to 100 basis points of rate hikes over the coming quarters due to persistent inflation. That said, some panelists see this as the end of the hiking cycle started in January 2026.

Panelist insight: Commenting on the outlook, Santiago Tellez, analyst at Goldman Sachs, stated: “In our view, this decision suggested a preference for a high-for-long approach as a substitute for additional hikes given a monetary stance that is likely already sufficiently restrictive for several Directors. In turn, Governor Villar highlighted the long lags of monetary policy—suggesting concerns about near-term overtightening—and judged that the current COP level should alleviate core inflation pressures.”

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