Colombia central bank seen hiking rates on Friday, though hold not ruled out

Colombia's central bank board is expected to ​raise its benchmark interest rate on Friday ​in an effort to contain inflationary ‌pressures, though ​some market participants have not ruled out a hold as policymakers wait to see how the economy evolves.

Seventeen of 31 analysts in a Reuters ‌poll this week said the board would raise its benchmark rate by 25 basis points to 12.5%, while one forecast a 75-basis-point increase to 13%. The remaining 13 analysts said the bank would keep the rate unchanged at ‌12.25% as it awaits fresh economic data. Third-quarter economic performance figures are due in mid-November and are expected ‌to show signs of a slowdown.

If the majority forecast proves correct, it would mark the second consecutive month when the board has raised rates, bringing cumulative increases so far in 2026 to 325 basis points. "We expect a rate increase given high inflation ⁠and upside risks, ​as well as the ⁠current difficult fiscal situation," Bancolombia wrote in a note.

The majority of the market believes the interest rate will close this year ⁠at 12.5%, meaning a rate hike on Friday would be the final one for the year. Annual inflation in Colombia was ​6.29% through September, more than double the central bank's 3% target, putting the country on track to ⁠miss the target for a sixth consecutive year.

"Inflation hasn't yet gone through end-of-year acceleration, uncertainty persists over the impact of the El ⁠Niño ​weather phenomenon and minimum-wage negotiations are uncertain, keeping pressure on the inflation outlook," Davibank said in a note. The potential rate hike would come after the US Federal Reserve and Chile's central bank kept their ⁠benchmark interest rates unchanged this week.

Raising interest rates now might not have the same impact on inflation as ⁠it would have at ⁠another time, Colombian central bank board member Laura Moisa told Reuters this month, but it could affect investment decisions. There will be no monetary policy meeting in November, ‌but policymakers will ‌vote on the rate in December.