Published on Friday, August 1, 2025

Colombia | Policy Rate Held Steady at 9.25% in July, in a Split Decision

Summary

In July, the Central Bank of Colombia kept the policy rate at 9.25% in a split decision. Although headline inflation eased slightly and economic activity showed more momentum, the Board highlighted the stability of core inflation and inflation expectations, as well as strong domestic demand, justifying a restrictive stance.

Key points

Key points:
In July, the Central Bank maintained the policy rate at 9.25% with a restrictive tone. Four members voted to keep the rate unchanged, two favored a 50 bp cut, and one opted for a 25 bp cut, mirroring June’s split.
he statement emphasized the stability of core inflation and expectations, despite headline inflation falling from 5.1% to 4.8%. Core inflation excluding food and regulated items remained steady, breaking the previous downward trend. Year-end expectations are around 4.7%, with analysts projecting only marginal declines, which reinforced the cautious monetary stance.
The Bank noted that economic activity is gaining traction, with the economic activity index (ISE) growing around 2.7% driven by services, and domestic demand estimated at 4.1%. The Finance Minister called for rate cuts to stimulate manufacturing, while the Governor argued that several sectors are already recovering and monetary policy should remain prudent.
Although the statement omitted fiscal issues, the press conference addressed public spending and the tax reform. The Minister defended higher primary spending due to its inflexibility and ruled out austerity, stressing that passing the reform is crucial to finance the government.
The message was more restrictive than in previous months, signaling fewer rate cuts than expected for the rest of 2025. Stable core inflation, strong domestic demand, and a robust labor market suggest monetary policy will stay tight, while fiscal dynamics, the budget debate in Congress, and the upcoming minimum wage discussion add further pressure.