MNI Colombia CB Preview - Sep 2025: Extended Hold Seen
Executive Summary
- The BanRep Board is widely expected to remain on hold at 9.25% for a third consecutive meeting on Tuesday, following recent stronger-than-expected economic activity data and a rebound in headline inflation.
- Governor Villar has spoken about his concerns over the slow disinflation process, as well as the elevated fiscal deficit, and is expected to lead a cautious majority of the Board in extending the pause in the easing cycle.
- However, the decision is likely to be split in a tight vote once again, with a dovish minority still pushing for a resumption of rate cuts. Latest survey data indicate that most analysts don’t see further cuts until Q1 2026.
Governor Villar has reiterated his cautious stance, saying that monetary policy needs to remain restrictive to ensure that inflation slows to target. In particular, he has continued to emphasise that inflation has not slowed as quickly as expected, while highlighting his concerns about the country’s elevated fiscal deficit, which he said tends to push up the neutral interest rate. Villar said that this neutral rate is about 2.7% points above inflation.
In the face of ongoing government calls to lower rates, Villar also said he will resist that pressure to cut interest rates more aggressively. With the economy projected to grow by 2.7% this year, he emphasised that monetary policy is clearly not impeding the economic recovery. Overall, Villar’s recent remarks have given a clear signal that he will push to extend the easing cycle pause at this month’s meeting, having warned previously that he wants to avoid lowering the policy rate and then having to raise it again in the near future.
