Colombia – BanRep resumes policy tightening and signals data-dependent path

Research evidence excerpt

Colombia – BanRep resumes policy tightening and signals data-dependent path

Deutsche Bank

Research

Emerging Markets Date

Latam Macro Notes 1 July 2026

Colombia – BanRep resumes policy tightening

Francisco Campos and signals data-dependent path

Chief LatAm Economist

+1-212-250-9764

Key points:

• BanRep decided by majority to increase the policy rate 75bp to 12%, Beatriz Garcia Nunes

against our expectation of a milder 50bp hike. LatAm Economist

+1-212-250-9584

• The communiqué portrayed a macro backdrop consistent with tighter

monetary conditions: rising inflation, elevated inflation expectations, Christian Gonzalez Rojas

Macro Strategist

firmer growth, a tight labor market, and a domestic demand outpacing +1-212-250-9184

production.

Carlos Munoz-Carcamo

• Forward guidance remained data-dependent. We reckon that the Macro Strategist

macroeconomic backdrop underpinning this hike will likely remain valid +1-212-250-2259

in the next decision.

• We are revising our rates projection. We pencil in 50bp in July and 25bp

in September, now lifting the terminal rate to 12.75% (vs 12.5% before).

We now envision gradual policy normalization to start in Q2 2027, with

the policy rate closing 2027 at 10.75% (vs 12% before).

• Strategy: We prefer BRL to COP. Risk-reward of steepeners is attractive.

The Colombian Central Bank (BanRep) determined by a 4-2-1 majority to raise

the policy rate 75bp to 12%, against our expectation of a milder 50bp hike. The

tally restored the divided vote of meetings prior to April’s “compromise hold,”

featuring a couple of board members voting for a 50bp cut and one favoring to

hold rates steady. During the press conference, FinMin Germán Ávila, who

arguably spearheads the dissenting camp, expressed the government’s

disagreement with this decision.