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

Summary

The Bank of the Republic maintained its benchmark interest rate at 9.25% in a divided decision by its Board, reflecting its cautious stance amid persistent inflation and fiscal risks. The institution also announced the cancellation of the Flexible Credit Line with the IMF.

Key points

• Key points:
• The Board of Directors of the Bank of the Republic maintained the interest rate at 9.25% in a divided vote, with the majority opting for monetary stability following the rise in inflation to 5.1% in August and increased inflation expectations for 2025 and 2026.
• Inflation in August increased to 5.1%, with core inflation excluding food and regulated items exceeding the technical team's forecasts, leading to an upward revision in inflation projections and a slower convergence toward the 3% target.
• The Flexible Credit Line agreement with the IMF was canceled, a decision based on adequate international reserve levels and no anticipated need to use these resources, although it represents a change in the economy's external protection scheme.
• The economy shows signs of recovery with 2.5% growth in the second quarter, driven by consumption and investment in machinery and civil works, while unemployment stood at 8.6% in August.

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