Colombia's central bank raised its policy rate by 25 basis points to 12.25% on Wednesday, Sept. 30, leaving borrowers to face higher costs. Most analysts had expected the bank to hold. The peso rallied anyway, reaching as much as 3,269 per U.S. dollar on Thursday morning before settling near 3,300.
The official reference rate stood at 3,312.84, down from 3,341.23 a day earlier. Higher local rates make peso deposits and bonds more attractive to foreign investors, and La República and Portafolio linked the currency's gains directly to the decision. About US$793 million changed hands in the morning session.
A Divided Board, a Costlier Loan
The vote wasn't unanimous. Four of the bank's seven board members backed the quarter-point increase. Two voted to hold, while one wanted a half-point hike. Finance Minister Miguel Gómez cast his first rate vote as a board member.
Governor Leonardo Villar said inflation remained "very far from the target." The move lifted the benchmark rate from 12% to 12.25%. The report puts the consequence plainly: borrowing now costs more.
A stronger peso cuts both ways. People who earn in dollars get fewer pesos, while peso earners can pay less for imported goods and travel. La República calculated that a U.S. trip cost 14.3% less in pesos than a year earlier, using reference rates of 3,908.12 on Sept. 29, 2025, and 3,349.63 a year later. Earlier in the month, the currency had slipped: the dollar rose 3.40% against the peso between Sept. 18 and 25, from 3,183 to 3,291.
Factories Grow, but Not Everywhere
The Davivienda Manufacturing PMI climbed to 54.6 in September from 54.3 in August, S&P Global reported on Oct. 1. That's its strongest reading since October 2025 and the fifth consecutive monthly increase in output. New orders grew at one of the fastest rates since the survey began in April 2011. Many firms credited "reduced market uncertainty following the election result," S&P Global wrote. President Abelardo de la Espriella took office on Aug. 7.
Employment rose for a sixth straight month, mainly through temporary hires. Hiring slowed to a four-month low. Business confidence reached its highest level since July 2019.
Davivienda chief of economic research Germán Cristancho called the momentum "outstanding." He described its resilience as "particularly interesting" because it contrasted with "the moderation currently observed in other areas of the economy." He pointed to retail sales and credit disbursements. The report cautioned that the PMI didn't mean the whole economy was booming, nor did it guarantee factory momentum would last once higher rates feed through.
The survey also found signs of strain. Delivery times lengthened the most in three months, which firms blamed on the earthquake, business closures and traffic jams. The magnitude 7.4 quake struck 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. Input costs rose at their slowest pace in nine months, though firms still reported higher prices for fabrics, foodstuffs and petroleum-based products. Brazil's manufacturing PMI, by contrast, fell to 44.8.
IMF Talks Open
Separately, IMF deputy managing director Nigel Clarke met Colombian officials in Bogotá from Sept. 25 to 28. He met with Vice President José Manuel Restrepo, Finance Minister Gómez and Villar. The sides agreed on no loan, credit line or programme. Instead, they opened technical working sessions on possible Fund support for a fiscal adjustment, and Clarke called the discussions "very productive and frank." The government had asked the Fund to bring forward its routine annual review.
Whether the contacts will lead to a formal programme, and on what terms, remains unclear. Higher U.S. interest rates could also draw funds back toward the dollar.
Why This Matters: Colombia's numbers point in two directions at once. Factory output and confidence are climbing, yet much of the new hiring is temporary, and hiring has slowed. Retail sales and credit are already moderating, while the rate increase makes loans costlier for households and small firms just as the quake's aftermath strains supply chains. IMF talks on a fiscal adjustment add another open question: who will carry the cost, and under what terms? The report doesn't answer that. How public institutions weigh inflation control against jobs and household borrowing will shape who benefits from the factory rebound, and who doesn't.