Colombia’s Central Bank Expected to Raise Rates to 11.25% as Inflation Surges Past 6%

The Colombia interest rate is expected to rise to 11.25% when the Banco de la República’s board meets for its second session of 2026, according to a Citi survey of 25 financial institutions and research centers. The Rio Times, the Latin American financial news outlet, reports that the anticipated 100-basis-point hike would replicate the January decision that ended nearly three years of easing — a dramatic policy reversal driven by surging inflation expectations and the global commodity shock from the Iran conflict.

Of the 25 entities surveyed, 18 forecast a full 100bp increase, including Bancolombia, BBVA, Deutsche Bank, Citi, Santander, and Davivienda. The remaining seven, including Corficolombiana, Moody’s Analytics, and Anif, expect a more moderate 75bp hike to 11%.

What Is Driving the Colombia Interest Rate Higher

The central driver is a dramatic unanchoring of inflation expectations. Core inflation has reached 6.1% and has risen 52 basis points in 2026 alone. The median analyst forecast for year-end inflation jumped from 4.6% to 6.4% in a matter of weeks, while 2027 expectations climbed from 3.8% to 4.8% — both well above the central bank’s 3% target.

The 23.7% minimum wage increase for 2026 — among the largest in Colombian history — has been a primary catalyst. Carolina Monzón, head of economic research at Itaú, noted that inflationary pressures from the wage adjustment are compounding with oil prices sustained near $100 per barrel, creating expectations of further cost pass-through into fuel, gas, and eventually fertilizer prices.

A Divided Board

Camilo Pérez, head of economic research at Banco de Bogotá, expects a 4-3 split on the seven-member board: four directors voting for the full 100bp hike and three favoring either a smaller increase or holding steady. The January decision followed a similar pattern, with four supporting the hike, two voting for a 50bp cut, and one for no change.

President Gustavo Petro has repeatedly clashed with the central bank over monetary policy, arguing that high rates are choking economic growth and raising the government’s borrowing costs. Finance Minister Germán Ávila, who sits on the board, is expected to push for rate cuts — putting the government in direct opposition to the majority of the institution’s technical leadership.

Where Rates Are Headed

David Cubides, chief economist at Banco de Occidente, projected that rates could close 2026 near 12% as the central bank fights to re-anchor inflation expectations in what he called a “challenging fiscal context.” The prospect marks a stark reversal: Colombia’s benchmark rate had been cut steadily from a peak of 13.25% in mid-2023 to 9.25% by late 2025 before the January shock.

César Pabón of Corficolombiana, among those forecasting the smaller 75bp hike, argued that partial relief in February inflation and signs of economic deceleration justify a slightly less aggressive pace. But even the doves acknowledge the direction is unambiguous: Colombia is tightening into a global environment of elevated uncertainty, and the central bank’s credibility depends on demonstrating that it will not let inflation expectations drift further from target.

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