The Colombian peso declined 1.4% to 0.026961 per U.S. dollar on Monday following the central bank's surprise decision last Thursday to leave its benchmark interest rate at 11.25%.
The Banco de la República's Board of Directors voted unanimously to hold borrowing costs steady. That outcome ran counter to virtually all forecasts in a Bloomberg survey of economists, with only one respondent having expected the pause. The decision arrived a few weeks before a pivotal national election.
Inflation readings remain elevated. In March, headline inflation was recorded at 5.6%, which is 46 basis points higher than the December figure. Core inflation, which strips out food and regulated items, rose to 5.8% - nearly 80 basis points above the level seen in December.
Despite those inflation pressures, the central bank pointed to a set of activity indicators it judged supportive of holding rates. Data on energy demand, manufacturing output, retail trade, and goods exports and imports led the bank to anticipate that first-quarter economic growth would outpace the fourth quarter of 2025. The bank also highlighted a dynamic labor market, noting unemployment at historically low levels and continued growth in salaried employment.
On expectations, the board reported that inflation projections at horizons of one year or longer have declined. However, it also noted that median expectations for year-end 2026 rose again.
The Board flagged external risks tied to the ongoing conflict in the Middle East, saying a prolonged escalation could exert upward pressure on international prices for energy, fertilizers, and certain goods, and could lead to tighter external financial conditions for Colombia.
In announcing the hold, the central bank framed the decision as consistent with supporting the recovery of economic activity while not jeopardizing the path toward convergence of inflation to the target. The institution emphasized that future policy moves will be conditional on the information available at the time.
Market and sector implications
The move is likely to reverberate across export and import sectors that are sensitive to the exchange rate and commodity prices, as well as financial institutions whose asset-liability dynamics and foreign-currency exposures respond to currency swings and interest-rate expectations.