Petro and BanRep Strike Truce as Colombia Interest Rate Stays at 11.25%

The Colombia interest rate decision arrived as a surprise — markets had priced in another hike, the central bank delivered a hold, and the finance minister who walked out a month ago was back in the room.

The Colombia interest rate held at 11.25% on April 30 in a unanimous Banco de la República vote, defying market expectations of a 50 to 75 basis point hike to 11.75% or 12%. The decision followed two consecutive 100bp increases this year that took the policy rate from 9.25% to 11.25%. The most consequential element was who attended: Finance Minister Germán Ávila walked into the meeting at 8:30 AM, ending a one-month boycott that began when he stormed out of the March 31 session in protest over the prior hike.

The Rio Times, the Latin American financial news outlet, reports that the hold marks the first concrete de-escalation in a month-long institutional crisis between the Petro government and the central bank. President Gustavo Petro had publicly attacked the March hike as “stupidity” and threatened to raise the minimum wage if rates moved higher. Ávila’s return is a tactical retreat that preserves the legal architecture without conceding the underlying disagreement.

Why the Colombia Interest Rate Hold Was Unexpected

Inflation data argued the other way. March headline inflation hit 5.6%, up 46 basis points from December’s reading, and core inflation excluding food and regulated prices rose to 5.8%, up 80 basis points from December. Both numbers sat well above the central bank’s 3% target.

Markets accordingly bet on more tightening. The Anif analyst survey showed 14 of 16 economists expecting a 50 to 75bp hike, and pre-meeting analysis from Protección, Anif, and others projected the policy rate would close April at between 11.75% and 12%. The unanimous hold blindsided that consensus.

What Ávila Said and What It Means

The finance minister called it a “constructive meeting.” He said the government had used the opportunity to exchange the differences that exist between board members and the executive, and to send Colombia a signal that consensus is possible between the central bank and the Treasury. Ávila stressed that the government continues to believe rates should fall rather than hold, but that maintaining the current level was preferable to another increase.

“It does not mean the differences have disappeared, they remain,” Ávila said, “but Colombian society must learn to coexist in the midst of differences.” Bank governor Leonardo Villar described the decision as supporting the recovery of economic activity without putting inflation convergence at risk. He added that any future move — in either direction — would depend on data available at the June meeting.

The Political Pressure Behind the Colombia Interest Rate Hold

Independent economists were quick to read the political signal. Bloomberg Línea analyst Julio Romero wrote that the unanimous decision “does not respond to technical criteria, but to government pressure on the bank over the past month.” Anif president José Ignacio López framed it as a no-win choice: “Raise rates and face more pressure, after threats to generate inflation through wages — or pause, generating doubts about autonomy.”

A counter-reading came from economist Jorge Restrepo, who argued the consensus avoided “an inconvenient cut and political-electoral attacks against the bank.” The argument is that without a hold, the bank would have faced either a politically costly rate cut or a damaging escalation with the executive — and the consensus delivered neither. Either reading agrees on the underlying point: the technical case for a hike was strong, and the political cost was higher.

What Comes Next for Colombia Interest Rate Policy

The next decision is scheduled for late June. Villar said the bank will reassess whether more restrictive policy is needed at that point, depending on the inflation trajectory. Three of the seven board members — Ávila, César Giraldo, and Laura Moisá — have signaled openness to changing the inflation target itself, or to using tools other than the policy rate to contain prices.

For markets, Colombia’s 11.25% rate remains one of the highest in real terms in Latin America, and the peso continues to absorb pressure from the dispute. The pending Council of State case that could remove the requirement for the finance minister to chair the board adds an additional layer of institutional uncertainty. The June meeting will test whether the April hold was a one-off truce or the start of a sustained dovish phase ahead of the May 2026 presidential election.