FX.co ★ Colombia Hikes Policy Rate to 10.25%

In a recent decision, the Central Bank of Colombia increased its policy rate by 100 basis points to 10.25% during its January meeting. This outcome followed a vote where four board members supported the rate hike, two advocated for a 50 basis point reduction, and one favored maintaining the existing rate. The board highlighted that the December headline inflation stood at 5.1%, slightly below the end-2024 target of 5.2%. Meanwhile, core inflation rose to 5.02%, and inflation expectations in January surged, with analysts projecting a median of 6.4% by the end of 2026 and 4.8% by the end of 2027. Market-based expectations for two years have exceeded 6%. Data from the fourth quarter indicate that the economy demonstrated significant vigor, and the technical team has estimated a GDP growth of 2.9% in 2025. Furthermore, the current-account deficit for 2025 is projected at 2.4% of GDP. Despite this, uncertainty about external conditions remains high due to trade tensions, U.S. migration policies, geopolitical conflicts, and perceptions of sovereign risk. The committee explained that this decision aims to steer inflation toward a downward trajectory.