Colombia’s Central Bank Interest Rate Outlook

By Nelson Bocanegra

(Reuters) – Colombia’s central bank is expected to leave its benchmark interest rate unchanged at 9.5% in the upcoming meeting, according to a Reuters poll conducted on Friday. Analysts predict inflation will remain above the target amidst global trade uncertainties and weak public finances.

Sixteen out of 24 analysts anticipate that the monetary authority will retain the rate. Meanwhile, six analysts forecast a 25-basis-point reduction to 9.25%, and two predict a 50-basis-point cut to 9.0%.

If the majority are accurate, this would signify the central bank’s third consecutive hold since commencing a rate-cutting cycle in December 2023.

Corfi, an investment firm, noted that greater global risk aversion and lower oil prices heighten the vulnerability of the Colombian economy. This has manifested in the depreciation of the peso, increased volatility in public debt markets, and a higher country risk premium.

Board members are also expressing concerns regarding fiscal stability and inflationary risks, as annual inflation decreased to 5.09% in March, still above the bank’s target of 3% (± 1%).

A rate hold decision is likely to be approved by a narrow majority among the central bank’s seven-member board. President Gustavo Petro has criticized the authority, claiming that the rate holds are political maneuvers aimed at undermining his administration, which central bank head Leonardo Villar dismissed earlier this month.

Jackeline Pirajan, chief Colombia analyst at Scotiabank (TSX:BNS), remarked that despite fiscal risks and international volatility, Colombia continues to have access to financing. This situation presents the central bank with some flexibility to adjust rates.

Analysts now predict fewer rate cuts in the coming months, estimating the benchmark rate will average 8.25% by the end of this year, up from a previous forecast of 7.75%, and will settle at 6.75% by the end of 2026, compared to an earlier estimate of 6.50%.