Colombia Central Bank Raises Interest Rates in June

The Central Bank of Colombia raised its benchmark interest rate by 75 basis points to 12% at its June 30 meeting, tightening policy as inflationary pressures intensified. Policymakers noted that inflation continued to accelerate, with headline inflation reaching 5.8% in May and core inflation rising to 6.0%, moving further away from the bank’s 3% target. Inflation expectations also remained elevated across all horizons despite some easing in June. Economic activity showed resilience, with GDP growth accelerating to 2.2% year-on-year in the first quarter, above the 2.0% expansion in the previous quarter, while domestic demand continued to outpace output. The labor market also remained strong, with unemployment at a historically low 8.0% in May and wages rising significantly. The board said the rate hike aims to steer inflation back onto a downward path, while future policy decisions will depend on incoming data and evolving external risks.

The Central Bank of Colombia kept its policy rate unchanged at 11.25% at its April 30 meeting, defying expectations for a hike to the 11.75%–12.00% range. The decision reflects a broad assessment of key indicators. Inflation has eased in recent months but remains above target, while economic activity shows mixed signals, with some sectors recovering and others still under pressure. The bank aims to avoid overly tight financial conditions that could derail the fragile recovery, while staying committed to returning inflation to its 3% target. Looking ahead, policy will depend on the path of inflation and economic growth.

The Central Bank of Colombia raised its policy rate by 100 bps to 11.25% in its March meeting where four board members voted for the increase, two voted for a 50 bp reduction and one voted to keep the rate unchanged. The board noted that headline inflation in February was 5.3%, above end-2025 (5.1%), while core inflation rose to 5.5% and inflation expectations showed a marginal descent in March, analysts’ median fell to 6.3% for end-2026 and stayed at 4.8% for end-2027, with market-based expectations near 7%. Indicators for the fourth quarter show the economy grew 2.2% and the technical team estimates GDP grew 2.6% in 2025. The current-account deficit is impacted by mixed terms of trade due to higher oil prices and costlier imports like gas. Uncertainty about external conditions remains elevated due to the war in Iran, global economic stability, and inflationary pressures from imported fertilizers. The committee said the decision is aimed at bringing inflation onto a declining path.