Colombia Interest Rate

The Central Bank of Colombia kept its benchmark rate at 9.5% in January, compared to the expected 25bps reduction, with five board members supporting the move, while one favored a 25bps cut and another a 50bps reduction. Annual inflation remained at 5.2% in December, unchanged from November, while core inflation eased to 5.2% from 5.4%, driven by lower service inflation, though service costs remained elevated at 7%. GDP expanded by 2.3% in Q4, exceeding growth in the previous three quarters and bringing 2024’s full-year expansion to 1.8%. However, exchange rate volatility, stemming from tighter global financial conditions, a stronger dollar, and Colombia’s fiscal uncertainty, has raised inflationary risks, limiting room for aggressive rate cuts. The labor market remained strong, with rising employment and falling unemployment. The central bank emphasized that future rate decisions will depend on incoming economic data while balancing inflationary pressures and growth recovery.