Central Bank leaves rates unchanged in September

Bank stands pat: At its meeting on 30 September, the Central Bank of Colombia (Banrep) decided by majority vote to keep the benchmark interest rate unchanged at 9.25%, matching market expectations. The Board of Directors was split: Four voted in favor of the hold, two supported a 50 basis point reduction and one backed a 25 basis point decrease.

Above-target inflation drives the decision: The Central Bank's decision was driven by above-target inflation and rising inflation expectations; these two factors are likely pointing to a slower convergence towards the Banrep’s 3.0% target. Additionally, as economic growth remained relatively stable in Q2, the Bank saw no need for a rate cut. Lastly, the Bank highlighted persistent uncertainty from the impact of U.S. trade policies and global geopolitical tensions. The Bank’s next policy meeting is scheduled for 31 October.

Panelists divided on upcoming policy moves: The Central Bank did not provide specific forward guidance on future interest rate movements, stating only that upcoming decisions will depend on the evolution of incoming economic data. A majority of our panelists foresee rate cuts by end-2025, while a minority expects the Bank to hold steady through December.

Panelist insight: Commenting on future Banrep moves, Santiago Tellez, analyst at Goldman Sachs, stated: “We maintain our expectation that the MPC will remain on hold in October, but still see the December meeting as open for a 25bp rate cut—our base case. This forecast is predicated on the materialization of two additional FOMC rate cuts, stable inflation expectations, and confirmation from upcoming activity data that the transitory buoyancy observed in July's economic activity has subsided.” On a more conservative note, Itaù Unibanco analysts stated: “Sticky inflation, increasing inflation expectations, strong consumption dynamics, and a large fiscal imbalance limit space for monetary policy action during the final two meetings of the year. We expect Banrep to hold the monetary policy rate at the current 9.25% through year-end.”

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