Central Bank of Colombia Undertakes Surprise Full Percentage Point Interest Rate Hike in Vote that Split Policymakers
January 31, 2026
Colombia’s benchmark interest rate had been cut by total of 400 basis points from a peak of 13.25% and starting with a 25-basis point reduction in December 2023. The most recent cut, also of 25 bps, had been done nine months ago. No rate change had been anticipated at the first policy review of 2026, but the Board of Directors instead reversed course and not in a small way, increase the interest rate to 10.25% from 9.25%.
Colombian consumer price inflation had ended last year at 5.1%, down from 5.3% in the prior month and 5.5% in October, and that likely set the table for a second element of surprise decision. Not only was a change made in a different direction from previous ones, but the vote supporting the move was far from unanimous. Three of the seven Board Directors dissented from the majority, two with votes to cut the rate by 50 basis points, that is by more than its single change in 2024. Only one committee member favored making no rate change.
Several reasons were mentioned in a released statement supporting the full percentage point reduction.
- Inflation expectations in January rose sharply compared to December’s measurements.
- The current account deficit in the balance of payments continues to widen and is estimated to reach 2.4% of GDP in 2025, following the 1.6% recorded in 2024,
- Uncertainty surrounding external conditions remains high, amid potential risks associated with escalating trade conflicts, U.S. immigration measures, geopolitical tensions, and perceptions of Colombia’s sovereign risk.
Copyright 2025, Larry Greenberg. All rights reserved.
Tags: Central Bank of Colombia
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