Colombia's central bank raises rate to 12.25% on risks

The board of the Banco de la República voted by majority to raise Colombia's benchmark interest rate by 25 basis points, taking it to 12.25% due to high inflation. The board highlighted an environment of elevated uncertainty for the close of the year as well as for 2027 and 2028.

According to the minutes of the policy meeting, inflation remains exposed to pressures from high temperatures, weather shocks, and external factors. The directors also pointed to risks stemming from Colombia's fiscal situation and the scope of public finance adjustments by the new government.

The minutes revealed that one director initially voted for a 50-basis-point hike to preemptively manage risks and protect long-term growth, but later backed the 25-basis-point increase to form a majority consensus. All directors affirmed that tackling inflationary pressures fosters an environment that encourages savings and private investment.

The general manager of the Banco de la República stated that inflation is projected to decelerate next year, with expectations that it will approach the 3% target toward 2028.