Banco de la República raised its policy rate to 12.25% on Wednesday, September 30, as Colombia’s August unemployment rate reached 9.4%, compared with 8.6% a year earlier. The increase raises the cost of money while more people are reported out of work.
Borrowers and Savers
The central bank lifted the rate by 25 basis points, from 12% to 12.25%, despite market expectations of a hold. The August Encuesta de Opinión Financiera, a survey by Fedesarrollo and the stock exchange that serves as a market reference, showed analysts expected the rate to remain at 12% through year-end.
Higher rates can feed into new peso loans through the DTF and IBR indexes. Variable-rate credit may respond later, while term deposits and savings products tend to track the policy rate upward. Borrowers and savers feel the decision in different ways: new loans may cost more, while deposit returns can rise.
Unemployment reached 9.4% in August, above the 8.1% forecast and the 8.6% recorded a year earlier. The report didn’t break down who was unemployed or how many people had variable-rate loans.
Banco de la República’s seven-member board voted 4-2-1. Four directors backed the increase, two wanted to hold the rate, and one favored a 50-basis-point increase. The rate had stood at 12% since July 1. In late June, the board raised it by 75 basis points to reach that level; four directors supported the move, two preferred a 50-basis-point cut, and one favored holding. Cumulative tightening for the year stood at 300 basis points.
Inflation and Government Policy
The board’s published reasoning centered on inflation. Annual inflation rose to 6.2% in August, or 6.24% in DANE’s unrounded figure, from 6.1% in June. It remained above the central bank’s 2-to-4-percent target range. Services inflation was 7.2%, and inflation expectations remained above target at all horizons.
The board paused in July to assess whether earlier increases were working. It gave no public signal before the September 30 meeting that it would move. The full reasoning was expected in minutes scheduled for Monday, October 5.
Finance Minister Miguel Gómez faced his first rate decision and said the board concluded “a moderate 25-basis-point increase in the interest rate was the best policy.” The government was also in early talks with the IMF, opened by the president on Sunday, and had requested a technical mission while discussing possible financing.
Bogotá’s new tax reform, worth about US$324 million a year, moved into implementation as those talks went ahead. The fiscal-rule committee, Carf, projected a 2026 deficit of 7.8% of GDP, above the government’s 7.2% projection. The report didn’t say how tax revenue or possible IMF financing would be distributed.
The Peso and Household Costs
The peso was firming when the rate decision arrived. The Superfinanciera set the official reference rate 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, while rent of COP 3,000,000 came to about US$906.
Reports said a stronger peso meant dollar earners 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. One report also said the peso’s recent firmness made a dollar-funded life in Colombia a little more expensive in peso terms.
The regional market report recorded 2,841 road blockades over the past four years, with an estimated cost of about 12.7 trillion pesos, or about US$3.8 billion. Banco de la República’s next rate meeting was scheduled for October 30, 2026.