Colombia’s Inflation Hits Two-Year High of 6.14% Despite 12% Interest Rate

Economy · Colombia

Colombia is fighting an inflation problem that its central bank had already moved to contain. Annual price growth hit a two-year high of 6.14% in June, just over a week after policymakers raised the benchmark rate to 12%.

Inflation runs hot

Colombia’s annual inflation accelerated to 6.14% in June, its highest level in about two years and above the top of analysts’ forecasts. The reading pushed the indicator well beyond the 6% mark that several projections had not expected until later in the year.

The result kept inflation far above the central bank’s 3% target. It also complicated the outlook for a monetary authority that has been trying to anchor expectations amid political pressure over interest rates.

The central bank’s response

On June 30, the board of Banco de la República voted by majority to raise the benchmark interest rate by 75 basis points to 12%. The decision bucked the easing trend seen across much of Latin America this year, where several central banks have been cutting rates.

The bank cited inflation expectations that had drifted away from target. Higher rates are intended to cool demand and credit, but they also raise borrowing costs for households and businesses across the economy.

Why prices are rising

Policymakers linked the deterioration in expectations to a steep increase in the minimum wage. President Gustavo Petro decreed a 23.7% rise for 2026, lifting the monthly floor to about 2 million pesos, or roughly US$495.

The bank called it the largest such increase since 1997, reaching around 2.4 million workers. Sharp wage rises can feed into prices across services and goods, especially where labour is a large share of business costs.

What it means for residents and investors

For households, the combination of high inflation and a 12% policy rate means both rising prices and costlier loans. Mortgages, consumer credit and business financing all become more expensive as the bank holds a restrictive stance.

For foreign investors and expatriates, a 12% benchmark rate can support the peso and local fixed-income yields, but it signals an economy still wrestling with price stability. The path of the currency will hinge on whether inflation turns lower in the months ahead.

A политически charged backdrop

The clash between the government’s wage policy and the central bank’s inflation mandate has become a defining economic tension in Colombia. President Petro has publicly pressed for lower rates, while the bank has prioritised bringing inflation back to target.

A politically charged backdrop

The road ahead

Attention now shifts to whether June marks a peak or the start of a longer climb. Further above-target readings would strengthen the case for the bank to keep rates high for longer.

For everyday Colombians and the foreigners who live and invest there, the immediate takeaway is a costlier, more uncertain year. How quickly inflation cools will shape growth, the currency and the cost of living into 2027.

Frequently Asked Questions

How high is Colombia’s inflation?

Annual inflation reached 6.14% in June 2026, a two-year high and above every analyst forecast, versus the central bank’s 3% target.

What is Colombia’s interest rate?

Banco de la República raised its benchmark rate by 75 basis points to 12% on June 30, 2026.

Why is inflation rising?

The central bank linked worsening inflation expectations to a 23.7% minimum-wage increase decreed for 2026, which lifted the monthly floor to about 2 million pesos (roughly US$495).

Sources

• Bloomberg — inflation 6.14%
• Bloomberg — rate to 12%
• Banco de la República