Colombia's central bank raised its benchmark interest rate to 12.25% on Wednesday, September 30, 2026. That same day, the country reported August unemployment of 9.4%. It had been 8.6% a year earlier, far above analysts’ 8.1% forecast.
Banco de la República lifted its policy rate by 25 basis points, from 12%. Markets didn't expect the move.
A Surprise Vote
The seven-member board, chaired by Governor Leonardo Villar, split 4-2-1. Four directors supported the quarter-point increase. Two preferred to keep the rate unchanged. One called for a 50-basis-point hike. The rate had stayed at 12% since July 1, following a 75-basis-point increase in late June. This year's cumulative tightening now totals 300 basis points.
Analysts had forecast a pause. In the August Encuesta de Opinión Financiera, a survey by Fedesarrollo and the stock exchange that markets use as a reference, economists expected the rate to remain at 12% through year-end. The board paused in July to assess the effects of its earlier increases. It gave no public signal before the September 30 meeting.
The board's published reasoning focused on persistent price pressures. Annual inflation reached 6.2% in August, or 6.24% in DANE's unrounded figure, up from 6.1% in June. That's above the central bank's 2-to-4-percent target range. Services inflation reached 7.2%, while inflation expectations remained above target at every horizon. The full explanation will appear in minutes scheduled for Monday, October 5.
Finance Minister Miguel Gómez, facing his first rate decision, said the board concluded “a moderate 25-basis-point increase in the interest rate was the best policy.”
Who Feels the Squeeze
A higher policy rate doesn't stay in the boardroom. It can push up the cost of new peso loans through the DTF and IBR indexes, while variable-rate credit adjusts later. Term deposits and savings products tend to rise with the policy rate. Reports on the decision urged borrowers to review loan offers and savers to compare rates before renewing deposits.
The jobs report makes those warnings more urgent. At 9.4% unemployment, more households face higher credit costs as the labor market weakens.
The currency moved, too. The Superfinanciera set the official TRM at 3,312.84 pesos per dollar for Thursday, October 1, down from 3,341.23 on Wednesday and 3,349.63 on Tuesday. Reports said the stronger peso left dollar earners with fewer pesos per transfer. People earning pesos but owing dollars got some relief. At the TRM, US$1,000 converted to COP 3,312,840, about COP 37,000 less than at Tuesday's rate. One report said the peso's firmness made life in Colombia funded by dollars a little more expensive in peso terms. COLCAP, the stock index, fell 0.38% to 2,549 points in one report.
Fiscal Pressure and the IMF
The increase came as the government began early talks with the International Monetary Fund. The president started them on Sunday. Bogotá has asked the fund to send a technical mission and is discussing possible financing. Meanwhile, a new tax reform worth about US$324 million a year moved into implementation.
The fiscal-rule committee, Carf, forecasts a 2026 deficit of 7.8% of GDP. The government's own forecast is 7.2%.
The next rate meeting is scheduled for October 30, 2026. The vote showed a board divided over the pace of change. The October 5 minutes should explain how members weighed August inflation against the peso's recent strength.
Why This Matters: Monetary policy affects people unevenly. A rate increase meant to curb inflation can raise borrowing costs for households and small businesses just as joblessness reaches 9.4%. Savers may benefit from higher deposit rates, but borrowers pay more, and variable-rate borrowers will feel the increase later. The 4-2-1 split shows that the central bank's directors themselves disagree on the right pace. The government is also negotiating with the IMF as the deficit outlook worsens and a new tax reform takes effect. Those pressures will test how public institutions balance price stability, jobs and fiscal credibility. The October 5 minutes and the October 30 meeting are next.