Why the bank paused
Colombia stopped raising rates as weaker growth signs offset concern about faster inflation. In the bank's words, "Colombia's annual economic growth appears to have slowed in the third quarter from the previous quarter," and "indicators of domestic demand point to weaker growth in both private and public consumption."
The slowdown has roots in a long stretch of tight policy. Output slipped slightly in August, the first monthly dip since April 2025, and both manufacturing and retail sales came in softer than expected.
The vote and expectations
The board left rates at 12.25% - the highest level since 2024 - with four members backing the decision and three arguing for an increase. In a Bloomberg survey, 17 of 31 analysts predicted a hold, while the rest looked for a quarter-point hike.
Inflation is still running hot. September came in at 6.29%, and the central bank's projections keep inflation above the top of its target band through 2027, which would extend the streak of misses to seven straight years.
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Public finances and reserves
Fiscal uncertainty is part of the backdrop. On Thursday, an "economic rescue" bill was delivered by the government to Congress to tackle worries over the mounting debt load. The plan features significant spending cuts but faces pushback over proposals to broaden VAT and income tax bases and to raise social security contributions. The proposal is part of a broader bid to steady the public finances, and it involves discussions with the International Monetary Fund regarding possible financial assistance.
Separately, the board approved buying 2 billion dollars from the government. According to Villar, the bank had been below recommended reserve levels before it began rebuilding its stockpile.
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