Banco de la República raised Colombia’s policy rate to 12.25% on Wednesday, September 30, as unemployment climbed to 9.4% in August. The seven-member board lifted the cost of borrowing while joblessness stood above both the 8.6% recorded a year earlier and the 8.1% forecast.
The board makes the call
The board voted 4-2-1 to raise the rate by 25 basis points, from 12%. Four directors backed the increase, two wanted to hold, and one favored a 50-basis-point rise. Borrowers and savers feel the decision through the financial system, though they weren’t casting votes in the boardroom.
A hold had been expected. The August Encuesta de Opinión Financiera, a Fedesarrollo and stock-exchange survey used as a market reference, showed analysts expecting the rate to stay at 12% through year-end. Before its September 30 meeting, the board hadn’t publicly signaled a move.
The rate had stood at 12% since July 1. In late June, the board raised it by 75 basis points to reach that level. The vote was divided then, too: four directors supported the increase, two preferred a 50-basis-point cut, and one favored holding. Cumulative tightening for the year reached 300 basis points.
The board’s published reasoning focused on inflation. Annual inflation rose to 6.2% in August, or 6.24% in DANE’s unrounded figure, from 6.1% in June. That put it above the board’s 2-to-4-percent target range. Services inflation stood at 7.2%, while inflation expectations remained above target at all horizons.
Borrowers face the rate’s reach
The higher policy rate can feed into new peso loans through the DTF and IBR indexes, while variable-rate credit responds later. Term deposits and savings products tend to move upward with the policy rate. Reports advised borrowers to recheck loan offers and savers to compare rates before renewing deposits. This is how a board decision reaches people seeking credit or trying to keep savings from losing ground.
The peso was firming as the board raised rates. The Superfinanciera certified its official reference rate, the TRM, at 3,312.84 pesos per dollar for Thursday, October 1, compared with 3,341.23 on Wednesday and 3,349.63 on Tuesday. At that rate, US$1,000 converted to COP 3,312,840. Reports said the stronger peso meant people earning dollars received fewer pesos per transfer, while people earning pesos with dollar obligations got relief. US$1,000 converted to about COP 37,000 less than at Tuesday’s rate.
Unemployment rose alongside the rate. But the board’s stated case emphasized inflation, not the 9.4% jobless figure. The full reasoning was due in minutes scheduled for Monday, October 5.
Fiscal pressure meets monetary power
Finance Minister Miguel Gómez said the board concluded “a moderate 25-basis-point increase in the interest rate was the best policy.” It was his first rate decision. The quote gives the official justification; the reported figures show the immediate setting in which that choice landed: rising unemployment and inflation above the target range.
The government had begun talks with the IMF, opened by the president on Sunday, and requested a technical mission while discussing possible financing. Bogotá’s new tax reform, worth about US$324 million a year, moved into implementation. Carf, the fiscal-rule committee, projected a 2026 deficit of 7.8% of GDP, above the government’s 7.2% projection. The next rate meeting was scheduled for October 30, 2026.