MNI BanRep Review - July 2025: Bar for Future Easing Raised

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Executive summary:

• The Colombian central bank left its overnight lending rate unchanged at 9.25%, against analyst expectations of a 25bp rate cut. However, the split board suggests that the balance of risks still remains tilted in favour of rate cuts in due course, albeit the bar for future easing has risen.
• The decision to remain on hold was driven by ongoing concerns over CPI expectations, as well as the fiscal deficit.
• Analysts expect the easing cycle to continue, but in a far more cautious manner.

In keeping rates unchanged at 9.25%, BanRep opted for a marginal surprise versus consensus – however the split board (4 for unchanged, 1 for 25bps cut, 2 for 50bps cut) suggests the balance of risks still remains for rate cuts in due course. Unsurprisingly, the finance minister disclosed the government vote was for a cut today.

BanRep’s statement noted that its decision “reflects a cautious approach to monetary policy” that incorporates the identified risks surrounding the expected convergence of inflation to the target. It adds that “future interest rate movements will acknowledge variations in inflation and its expectations, the behavior of economic activity, and the internal and external risk risk-balance” – a tweak from June’s guidance which just stated that “future decisions will be determined based on the latest information available”.