Banco de la República raises Colombia interest rate to 12.25%

Colombia’s central bank, Banco de la República, increased its benchmark interest rate by 25 basis points to 12.25%, effective October 1, 2026. The decision, announced on September 30, was reached with a split vote: four board members supported the increase, two favored keeping the rate unchanged, and one advocated for a larger 0.5-percentage-point hike.

Governor Leonardo Villar cited persistent inflationary pressures as a primary driver for the move. Annual inflation reached 6.2% in August, significantly exceeding the bank’s 3% target. Specific pressures included rising costs in food, regulated prices, and services. Analysts expect inflation to potentially reach 6.8% by the end of 2026, with risks exacerbated by the El Niño weather phenomenon.

This rate hike marks a total increase of three percentage points since the end of 2025. The decision comes during the first administration of President Abelardo de la Espriella and is expected to influence Colombian peso bonds and major US-listed entities such as Bancolombia and Ecopetrol.