Colombia’s central bank raised its benchmark interest rate to 12.25% on Sept. 30, making peso deposits and bonds more appealing to foreign investors but raising borrowing costs for households and businesses. The Banco de la República’s move changed credit prices across the economy. The peso strengthened the next morning, reaching 3,269 per U.S. dollar.
Who Benefits From Higher Rates
Most analysts expected the central bank to leave rates unchanged. Four of the seven board members supported the quarter-point increase, two voted to hold and one favored a half-point hike. The official reference rate stood at 3,312.84 on Oct. 1, down from 3,341.23 the previous day. La República and Portafolio directly tied the peso’s gains to the rate decision.
La República put morning trading between 3,269 and 3,346 pesos per dollar, with about US$793 million changing hands. Its late-morning quote of 3,300.39 came close to Portafolio’s 3,303.88. Earlier in September, the peso had weakened: Portafolio said the dollar gained 3.40% against it between Sept. 18 and 25, rising from 3,183 to 3,291.
A stronger peso cuts both ways. Dollar earners get fewer pesos, while people paid in pesos may pay less for imported goods and travel. La República’s comparison of reference rates on Sept. 29 found a U.S. trip cost 14.3% less in pesos than a year earlier. But higher rates also make borrowing more expensive. That’s the cost borrowers bear as the central bank tightens credit to pursue its policy.
Factory Growth, With a Cost
Colombia’s Davivienda Manufacturing PMI climbed to 54.6 in September from 54.3 in August, S&P Global reported Oct. 1. The reading marked the strongest result since October 2025 and the fifth straight monthly rise in output. Above 50 means conditions improved from the prior month; the index has averaged about 50.9 since 2015.
The survey tracks orders, output, jobs, delivery times and stocks. S&P Global surveys about 350 manufacturers each month for Banco Davivienda, which calls itself Colombia’s second-largest bank by loans. The figure measures factory activity, not proof that the broader economy is thriving. The report warned that the PMI doesn’t show the whole economy booming, and it can’t guarantee factory momentum will last once higher rates take hold. Retail sales and credit were moderating.
New orders picked up, with growth among the strongest since the survey started in April 2011. Companies reported winning new customers and receiving larger orders from existing clients. Many linked the orders to “reduced market uncertainty following the election result,” S&P Global wrote. President Abelardo de la Espriella took office on Aug. 7. Manufacturers raised purchasing at a record pace, while finished-goods stocks declined as firms sold warehouse goods to meet demand.
Employment increased for a sixth month in a row, mainly through temporary hires, though hiring slowed to a four-month low. Business confidence reached its highest point since July 2019. Companies pointed to advertising, competitive pricing, diversification, partnerships and new product lines.
Input costs rose at their slowest pace in nine months, yet firms still reported pricier fabrics, foodstuffs, petroleum-based products and raw materials. Factory selling prices rose more slowly than their long-run average as some companies held off on increases to win sales. Delivery times lengthened the most in three months; firms blamed the earthquake, business closures and traffic jams. A magnitude 7.4 earthquake hit on Aug. 10, with its epicentre in Chocó on the Pacific coast. The Pan American Health Organization called it Colombia’s strongest earthquake in a decade.
The Limits Behind the Optimism
Davivienda chief of economic research Germán Cristancho called manufacturing momentum “outstanding” and its resilience “particularly interesting” because it contrasted with “the moderation currently observed in other areas of the economy.” He pointed to retail sales and credit disbursements; borrowing costs were rising too. Central bank governor Leonardo Villar said inflation remained “very far from the target.” On Sept. 30, the bank lifted the benchmark rate from 12% to 12.25%. The vote marked Finance Minister Miguel Gómez’s first as a board member. Brazil’s manufacturing PMI slipped to 44.8 in September.
The October PMI was due in early November. DANE, Colombia’s national statistics agency, was expected to release official industrial output figures later; those measure volumes, not direction.
Separately, IMF deputy managing director Nigel Clarke met Vice President José Manuel Restrepo, Finance Minister Miguel Gómez and central bank governor Leonardo Villar in Bogotá from Sept. 25 to 28. The parties agreed to no loan, credit line or programme. They began technical working sessions on possible Fund support for a fiscal adjustment, and Clarke described the discussions as “very productive and frank.” The government had asked the Fund to bring forward its routine annual review. Whether the talks would produce a formal programme, and on what terms, remained unclear. Higher U.S. interest rates could pull funds back toward the dollar. The report didn’t provide the closing peso rate for Oct. 1.