Colombia's Banco de la República raised its intervention rate by 100 basis points to 10.25%—the highest in over a year—in its first 2026 board meeting, citing persistent inflation above 5% for nearly six months and unanchored expectations from a 23.8% minimum wage hike decreed by President Petro's government. The decision, with a split 4-2-1 vote, drew market surprise and government criticism over economic contraction risks.
The Banco de la República's board met on January 30, 2026, voting 4-2-1 to increase the intervention rate from 9.25% to 10.25%—a 100 basis point hike, the first upward move in seven months and the largest since December 2022. Bank manager Leonardo Villar attributed the action to unanchored inflation expectations, with analysts' median forecasts rising from 4.6% to 6.4% for end-2026 and debt market expectations exceeding 6% over two years. Inflation stood at 5.1% in 2025, remaining above the 2%-4% target for six years and the third-highest regionally.
The hike follows President Gustavo Petro's December 29, 2025, decree setting a 23.8% minimum wage increase for 2026 to $1,700,000 monthly, plus a $253,118 transport subsidy (totaling $2 million), with employer costs reaching $2.9 million including benefits. Petro called it a 'family vital wage' for dignified living, but it exceeded employer (7.21%) and union (16%) proposals, as well as technical recommendations under Law 278 of 1996 for a two-digit rise based on inflation, productivity, and GDP.
Markets were surprised: of 25 surveyed entities, only BBVA predicted 10.25%; most expected 9.75% or less. Finance Minister Germán Ávila criticized the move as raising production costs and contracting the economy amid growing demand, announcing a $500 gasoline price cut (doubled from $300 planned). Villar noted TES rates had already risen over 200 basis points. Experts warn the wage hike risks fueling inflation, formal job losses amid 55.4% informality (80% rural), and a $9 billion fiscal burden. Peso revaluation has not curbed inflation from imported goods (one-third of the basket).
The bank projects 2.9% GDP growth for 2025 and aims to anchor inflation by 2027 via restrictive policy. Tensions underscore the bank's limited independence, with the president appointing co-directors—unlike Peru's more autonomous central bank. Editorials defend the bank's constitutional mandate to preserve peso purchasing power against government 'economic politicking.'
