Colombia’s central bank board meets on Friday with the market leaning toward another increase, but not by much. In a Reuters poll this week, 17 of 31 analysts expected the Banco de la Republica to raise its benchmark rate by 25 basis points to 12.50 percent. One analyst forecast a 75 basis point increase to 13 percent. The remaining 13 expected the board to hold at 12.25 percent while it waits for fresh data, with third quarter economic performance figures due in mid-November expected to show signs of a slowdown.
The case for moving is the inflation record. Annual inflation was 6.29 percent through September, more than double the central bank’s 3 percent target, putting Colombia on track to miss the target for a sixth consecutive year. Bancolombia, cited in the poll report, pointed to high inflation, upside risks and a difficult fiscal situation. Davibank noted that inflation has not yet gone through its usual end of year acceleration, that the impact of the El Nino weather phenomenon is uncertain, and that minimum wage negotiations, a key indexation channel in Colombia, remain unresolved.
A detailed account of Bancolombia’s Radar report, summarised by Finance Colombia, fills in the persistence problem. Services inflation stood at 7.19 percent in September, driven by prices that reset off past inflation or the minimum wage, and perishable food prices rose 14.14 percent on the year on El Nino supply shocks. Analysts’ expectations for the end of 2026 stand at 6.83 percent. Inside the board, the hold camp has been shrinking: the option of leaving the rate unchanged drew four votes in July and only two in September, and the September minutes recorded most members judging that price pressures have spread across a larger share of the basket.
If the majority forecast is right, Friday’s move would be the second consecutive monthly increase and would bring cumulative increases in 2026 to 325 basis points. Views diverge on what follows. The majority of the market in the Reuters poll believes the rate will close the year at 12.50 percent, making a Friday hike the last of the year. Bancolombia’s scenario differs, anticipating a further increase in December to 12.75 percent. There is no meeting in November, so the December vote is the next decision either way.
The counterargument is already on the record. Board member Laura Moisa told Reuters this month that raising rates now might not have the same effect on inflation as at another time, though it could affect investment decisions, a warning that lands harder as activity softens: Colombia’s monthly economic monitoring indicator contracted 0.04 percent on the year in August, a month marked by earthquake damage. The decision, due later on Friday after this edition, will show whether the board prices the inflation miss or the slowdown first.