Colombia Unexpectedly Holds Rates Despite Price Pressures

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Or sign-in if you have an account.ghedt{cn8pf{dyuh]7d{5x8w_media_dl_1.png Colombia central bank, national(Bloomberg) — Lea la nota en españolTHIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountColombia’s central bank unexpectedly held interest rates unchanged in the final monetary policy meeting under President Gustavo Petro’s administration despite mounting inflationary pressures.The seven-member board kept the benchmark interest rate at 12% on Friday, Governor Leonardo Villar told reporters after the meeting. Just four of 27 economists surveyed by Bloomberg had forecast the move, while the rest had expected rate increases ranging from 25 basis points to as much as 75bps. Four members voted to hold rates steady, while three voted for a half-point increase, Villar told reporters in Bogotá.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againVillar also announced that the central bank will launch an initiative to accumulate as much as $4 billion in international reserves. The auction will be Aug. 3, the options can be exercised from Aug. 4The rate decision came despite inflation remaining above 6%, with policymakers facing the prospect of missing the bank’s target of 3%, plus or minus one percentage point, for both this year and next. The Colombian peso has strengthened more than 20% against the dollar in 2026, helping ease imported inflation while weighing on exporters of coffee, bananas, flowers and other commodities.Inflation is currently reflecting the combined effects of the government’s expansionary fiscal policy, the 23% minimum-wage increase and temporary food and energy shocks, Andres Abadia, Latin America economist at Pantheon Macroeconomics, wrote in a research note to investors before the meeting and had correctly forecast the decision. The decision can be read as a last victory for Petro who had a turbulent relationship with the central bank. The leftist repeatedly attacked policymakers for keeping borrowing costs elevated despite accelerating inflation, while Finance Minister Germán Ávila, who attended his final policy meeting, echoed those criticisms and at one point threatened to boycott rate decisions.Governor Villar and a majority of board members have consistently argued that inflation expectations remain unanchored and that monetary policy should remain restrictive until price pressures are on a downward path.Before the meeting, economists surveyed by the central bank expected the policy rate to peak at 12.5% before easing begins in March 2027.Investors have poured money into Colombian assets, attracted by high interest rates that support carry-trade strategies and by expectations that President-elect Abelardo de la Espriella will implement fiscal adjustments. Colombia’s independent fiscal committee estimates the budget deficit will exceed 7% of gross domestic product this year.While Petro argued that high government bond yields reflected the central bank’s elevated policy rate, policymakers have consistently maintained that Colombia’s fragile fiscal outlook is the primary driver of sovereign borrowing costs.Economist Miguel Gómez Martínez will become Colombia’s next finance minister and will join the central bank’s board as the government’s representative. Policymakers are scheduled to meet again at the end of September.—With assistance from Rafael Gayol and Valentine Hilaire.(Updates to add vote count, plan to accumulate reserves from third paragraph)This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.