Colombia central bank seen raising benchmark rate as inflation pressures persist

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Colombia central bank rate decision

Highlights

17 of 31 analysts in a Reuters poll expect Colombia's central bank to raise its benchmark rate by 25bps to 12.5% at Friday's meeting.
Colombia's annual inflation stands at 6.29% in September, more than double the central bank's 3% target, prompting concerns of further price acceleration.
If raised, the rate hike would mark the second consecutive monthly increase, bringing 2026's cumulative hikes to 325bps, with markets expecting 12.5% as the year-end rate.

Rate decision outlook before Friday meeting

As reported by Reuters, 17 of 31 analysts in a poll this week expect Colombia's central bank board to raise its benchmark interest rate by 25 basis points to 12.5%, while one analyst forecasts a larger 75-basis-point increase to 13%. The other 13 analysts expect the bank to keep the rate unchanged at 12.25% as policymakers wait for additional economic indicators.

Third-quarter economic performance figures are due in mid-November and are expected to show signs of a slowdown. If the majority forecast proves correct, it would mark a second straight monthly rate increase and bring cumulative hikes in 2026 to 325 basis points.

Bancolombia says it expects a rate increase because of high inflation, upside risks and a difficult fiscal backdrop. The majority of the market also expects the benchmark rate to end the year at 12.5%, implying that any move on Friday would likely be the final increase of 2026.

Inflation risks and regional policy backdrop

Annual inflation in Colombia stands at 6.29% through September, more than double the central bank's 3% target, leaving the country on course to miss that goal for a sixth consecutive year. Davibank says year-end price acceleration has not yet fully passed through, while uncertainty over the El Niño weather phenomenon and minimum-wage talks continues to weigh on the inflation outlook.

The possible move comes after the U.S. Federal Reserve and Chile's central bank both keep their benchmark rates unchanged this week. Central bank board member Laura Moisa told Reuters earlier this month that raising rates now may have a weaker effect on inflation than at other times, though it could still influence investment decisions.

There is no monetary policy meeting scheduled for November, but policymakers are due to vote on interest rates again in December.

The Federal Reserve’s internal debate over how openly officials should communicate policy was the focus of our earlier coverage, as investors tried to gauge the odds of another rate hike after September’s increase. We noted that frequent public remarks by policymakers helped cool expectations for further tightening, even as a firmer inflation reading kept the outlook uncertain and markets highly sensitive to Fed signals.

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