Colombia’s Inflation Quickens

Colombia’s inflation rate sped up to 5.56% in March, up from 5.29% in February, and that was enough to flip the story from “prices are cooling” to “prices are heating up again” in a single month. Prices also rose 0.78% from February to March, faster than many economists expected. (bloomberg.com) That matters because Colombia’s central bank had already raised its benchmark interest rate by 1 full percentage point to 11.25% on March 31. A higher benchmark rate is the price banks pay for money, and when that goes up, mortgages, business loans, and credit lines usually get more expensive too. (banrep.gov.co, bloomberg.com) The bank’s target for inflation is 3%, so 5.56% is not just high, it is almost double the goal. Banco de la República, Colombia’s central bank, said inflation in January and February was already above the 5.1% level seen at the end of 2025, which is why it tightened policy before the March price data even arrived. (banrep.gov.co, bloomberg.com) This is not just about one bad month for tomatoes or bus fares. Core inflation excluding food sped up to 5.39%, which tells policymakers the pressure is spreading beyond the most jumpy items and into the broader economy. (bloomberg.com) One reason officials are worried is wages. Bloomberg reported that central-bank board members see the record minimum-wage increase as one source of pressure, because when labor costs jump sharply, companies often try to recover that cost by raising prices. (bloomberg.com) Another reason is the government’s budget stance. The central bank said excess fiscal spending can keep demand hotter than policymakers want, which makes it harder for higher interest rates to slow the economy enough to bring inflation back down. (banrep.gov.co, bloomberg.com) Then there is the external shock. Banco de la República said the war in Iran could lift Colombia’s oil export income, but it could also raise the cost of imported gas and fertilizers, which is the kind of trade-off that helps one part of the economy while making prices worse almost everywhere else. (banrep.gov.co) That split is why exporters and regional companies are watching so closely. Higher oil prices can help Colombia earn more abroad, but higher fertilizer, fuel, and financing costs squeeze farmers, manufacturers, retailers, and any business that needs imported inputs or local borrowing. (banrep.gov.co, deloitte.com) The politics are getting hotter too. Bloomberg reported that Finance Minister Germán Ávila walked out of the March rate meeting, while President Gustavo Petro has publicly pressed the board to cut borrowing costs instead of raising them ahead of the 2026 presidential election cycle. (bloomberg.com) So the next decision is no longer just about whether inflation is above target. It is about whether a seven-member board that just split 4-2-1 on rates will keep tightening even as growth was only 2.6% in 2025 and the government is openly fighting the bank over how painful the cure should be. (banrep.gov.co)