Colombia's Central Bank Hikes Rate as Finance Minister Moves to Tighten Fiscal Rule

The Board of Colombia's central bank, Banco de la República, voted to raise the policy interest rate by 75 basis points to 12%, citing a "serious deterioration in the credibility of the inflation target" as inflation expectations remain well above the 3% goal. While most directors supported the increase, a minority warned that further tightening could harm growth, investment and export competitiveness, noting supply‑side shocks such as climate impacts on food production and higher transport costs.

New Finance Minister Miguel Gómez announced that restoring the Fiscal Rule will be a priority, targeting a real deficit near 7.5%—well above the 5.3% medium‑term fiscal framework. He said the rule should be made "more solid" to prevent future fiscal slack and outlined an austerity plan to begin on 7 August, including a freeze on public spending and stricter revenue projections. Gómez also scheduled a meeting with the autonomous Fiscal Rule Committee (CARF) and remarked, «Vamos a tardar un tiempo», about the timeline for full compliance.