Colombia’s Central Bank Expected to Hold Rates at 12% as the Peso Slides
COLOMBIA · ECONOMY
Key Facts
- —The country Colombia exports oil and borrows heavily abroad, so its peso moves with oil prices and US interest rates.
- —Why it matters The central bank has raised its main rate three times this year, to 12%; inflation hit 6.24% in August.
- —What happened Tuesday’s official rate is 3,349.63 pesos per US dollar, the weakest peso since 7 July.
- —The decision The board rules on Wednesday 30 September; 18 of 23 institutions polled by Citi expect no change.
- —What it means for you A dollar buys about 9% more pesos than on 14 September, but about 14% fewer than a year ago.
- —Still open How the board splits, and whether the new finance minister backs a rise, is not yet known.
Colombia’s central bank decides on interest rates on Wednesday 30 September, with the peso at its weakest since early July. The official rate for Tuesday is 3,349.63 pesos per US dollar, according to the Superintendencia Financiera, the financial regulator.
On Monday the dollar closed at 3,362 pesos per dollar, up 1.5% from Friday, the business site Valora Analitik reported. Portafolio, a business daily, put the day’s average traded price at 3,350.16 pesos per dollar.
What the board decides on Wednesday
The board of Banco de la República, Colombia’s central bank, sets the benchmark rate that steers what banks charge for credit. It has raised that rate three times this year, from 9.25% to 12%, most recently by 0.75 points in June.
The board then held the rate in July, and there was no rate decision in August. Wednesday is the first rate decision for the new finance minister, Miguel Gómez Martínez, who sits on the board.
Finance ministers usually vote to cut rates or hold them, the news weekly Semana noted. Some wonder whether Gómez Martínez will side with César Giraldo and Laura Moisá, co-directors appointed by the former left-wing president Gustavo Petro.
Oxford Economics, a British consultancy, argued in July that Gómez Martínez would probably strengthen the board majority favouring higher rates, Semana reported. Wednesday is the first real test of that view.
What analysts expect
Of 23 institutions polled by Citi, 18 expect no change from 12%, the business daily La República reported. Anif, a think tank, and Banco Popular expect 12.25%, while Bancóldex, Corficolombiana and Credicorp Capital expect 12.5%.
Anif’s own survey of 22 institutions found 16 expecting no change, four a half-point rise and two a quarter-point rise. Analysts polled monthly by the central bank see the rate ending 2026 at 12.25%, Semana reported.
The September survey by Fedesarrollo, an economic research institute, and the Colombian stock exchange also expects no move this month. Its respondents see 12.25% by December and inflation of 6.82% at year-end, Portafolio reported.
A rise to 12.5% would take the rate to its highest in more than two years, Valora Analitik noted. Camilo Pérez of Banco de Bogotá told La República the board had surprised markets in most decisions this year.
Why the peso is weakening
The peso lost more than 4% in the week to Friday 25 September, the steepest fall among emerging-market currencies, Bloomberg Línea reported. El Espectador, a Bogotá daily, put the weekly loss at 4.4%, the largest in Latin America.
Much of the pressure comes from the United States. In mid-September the Federal Reserve, the US central bank, raised its rate for the first time since July 2023.
The 10-year US Treasury yield, a benchmark for global borrowing costs, stood at 5.23% on Monday, Valora Analitik reported. “In general, the dollar has strengthened against most currencies in the world,” Pérez, the bank’s research head, told El Espectador.
Oil, one of Colombia’s main exports, usually supports the peso when prices rise. This time, higher crude prices have fed fears of US inflation and higher global interest rates, Portafolio noted.
Worries at home add to the pressure. The brokerage Acciones & Valores said news of formal talks with the International Monetary Fund (IMF) made investors more cautious.
Inflation is moving the wrong way
Consumer prices rose 6.24% in the year to August, according to DANE, the national statistics office. That was above the 6.10% analysts had forecast and about twice the central bank’s 3% target.
Anif says services and food make up 73% of annual inflation, and it warns of a “very strong” El Niño. That Pacific weather pattern is already lifting electricity tariffs and could push up food prices, the think tank said.
Many service prices in Colombia are linked to the minimum wage, which rose 23% this year, Semana reported. Citing Anif, the magazine said inflation may not return to target until 2028.
At the same time the economy is slowing, which argues against tighter money. DANE’s monthly economic activity index grew 1.1% from a year earlier in July, after about 3.5% in June.
The government and the IMF
In July Gómez Martínez said high rates are not good news, but the government would respect the board, Valora Analitik reported. He called inflation the hardest tax for low-income households to bear.
He says the state spends about 40 trillion pesos a month, or US$11.9 billion at Tuesday’s rate of 3,349.63. Revenue is about 29 trillion (US$8.7 billion), a gap he blames on the Petro government, Semana reported.
The Finance Ministry has asked the IMF to begin its regular review of Colombia’s economy, known as an Article IV consultation. Nigel Clarke, an IMF deputy managing director, visited Bogotá on 25–28 September, meeting governor Leonardo Villar and board members.
Clarke said Colombia keeps important strengths, including an independent central bank and a resilient financial system, Semana reported. The Fund also urged steps to restore fiscal discipline and investor confidence.
President Abelardo De la Espriella ordered the IMF talks in a televised address on Sunday 27 September. Read more in Colombia Turns to the IMF, Weeks After Its Finance Minister Ruled It Out.
The case for holding, for raising, and against high rates
Hugo Camilo Beltrán of Acciones & Valores expects Colombia’s central bank to hold, arguing that 12% is already tight. He puts the real rate, the policy rate minus expected inflation, near 6%, against a neutral level of about 3.4%.
David Cubides, chief economist at Banco de Occidente, believes the cycle of rises has ended. “Beyond the end of this year, inflation could start to fall,” he told La República.
The investment bank Corficolombiana expects a half-point rise instead. It notes that underlying inflation is above 6% and that inflation expectations sit above target, Semana reported.
Catalina Tobón of the asset manager Skandia expects a hold but doubts the vote will be unanimous. “If they want to anchor expectations, they will have to raise rates at least once more,” she told La República.
A critic of high rates, Jaime Alberto Rendón of Universidad de La Salle, calls them “a permanent handbrake against economic growth.” In a 7 September essay for Sur, a left-leaning research group, he argued inflation often stems from supply shocks, not excess demand.
The peso over a longer view
The peso is still far stronger than a year ago, when the official rate was 3,908.12 pesos per dollar. The dollar’s 2025 high was 4,416.69 pesos per dollar, on 10 April.
The peso then gained after the first round of the presidential election, reaching 3,048.12 pesos per dollar in late August. Bloomberg Línea linked that rally to lower perceived country risk, oil above US$100 a barrel and foreign buying of Colombian bonds.
Munir Jalil, chief Andean economist at BTG Pactual, said the year’s low for the dollar had “very probably” already been seen. His bank forecasts 3,460 pesos per dollar at the end of 2026 and 3,530 in 2027, Bloomberg Línea reported.
Other forecasters see less pressure. Analysts in the Fedesarrollo survey expected 3,240 pesos per dollar at the end of the year, Portafolio reported.
Colombia’s plans for 2027 include about 88 trillion pesos (US$26.3 billion) of foreign borrowing, Bloomberg Línea reported. A weaker peso makes that debt costlier to repay, which is why the exchange rate matters for the budget.
What comes next, and what it means for you
Every US$1,000 now converts to about 3.35 million pesos, up from 3.07 million on 14 September. A year ago US$1,000 bought about 3.91 million pesos, so peso prices still cost more in dollars than last September.
Minutes of the meeting follow on Monday 5 October, said Daniel Londoño of the payments firm Global66. He says a hold backed by a wider majority could push the dollar towards 3,400 pesos per dollar.
A surprise rise could pull it back to 3,250–3,280 pesos per dollar, he told El Espectador. The next big external signal is the Fed meeting on 27 and 28 October.
The recent slide does not undo the peso’s gains: a dollar still buys about 14% fewer pesos than a year ago. Nor would a hold mean inflation is beaten; Valora Analitik reported the bank sees room to cut only from 2027.
What is not yet known is how the board will split, and whether the new minister will back a rise. Nor is it known whether the IMF talks will lead to a loan or only to the Article IV review.
Frequently Asked Questions
What is the Banco de la República?
It is Colombia’s central bank, based in Bogotá. Its board sets the benchmark interest rate, now 12%, and aims to keep inflation at 3%.
Why is the Colombian peso falling?
Analysts point mainly to a stronger US dollar after the Federal Reserve raised rates and signalled more. Worries about Colombia’s public finances and its IMF talks have added pressure.
Is the peso weak compared with recent years?
Not compared with the past two years. At 3,349.63 pesos per dollar, a dollar buys about 14% fewer pesos than a year ago, and far fewer than at its April 2025 high of 4,416.69.
What does the decision mean for people living in Colombia?
A hold keeps peso loans and mortgages expensive. A rise would make borrowing dearer still but could support the peso, which means fewer pesos for each dollar earned abroad.
This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error
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