The 2026 budget would have influenced the Bank of the Republic not to lower the rate.
Since the afternoon of Thursday, July 31, nearly all private and public economic research centers, academics, banks, and even international entities, began making new calculations about what interest rates will hold for the end of the year, after the Board of Directors of the Bank of the Republic left its monetary policy rate unchanged at 9.25% .
(Read: Banco de la República decided to maintain the interest rate at 9.25% ).
This was surprising since more than 80% of analysts surveyed said they would cut the rate by 25 basis points (bp).
The decision, according to the issuer, was based on uncertainty about the complexity of external financing conditions, the heightened uncertainty stemming from trade tensions, and the expected slow normalization of monetary policy in the U.S.
The vote replicated the June pattern, with four co-chairs voting to hold the rate, two for a 50 bp cut, and one for a 25 bp cut .
The Board acknowledged that inflation continues to slow, in line with the lowest level recorded since June 2021.
(See: Interest rates: Petro criticizes Banrep's decision to leave them unchanged for August ).
Short-term inflation expectations remained stable compared to June, although they remain well above the upper limit of the issuer's tolerance range . Annual inflation expectations for December of this year stand at 4.8%, the same as the previous month, while 12-month expectations increased to 3.90%. Meanwhile, expected inflation for December 2026 increased to 3.8%.
For Laura Clavijo, director of Economic, Sector, and Market Research at Bancolombia, despite not being explicit on this occasion, the issuer has been warning about the impact of the fiscal situation on monetary policy decisions.
The analyst says that "the publication of the 2026 General National Budget reinforced the specter of local fiscal uncertainty. The Ministry of Finance's proposal contemplates 6.5% growth compared to 2025, implying a total of $556.9 billion. The calculations presented show an increase in primary spending, based on an assumption of lower interest payments and higher revenues."
Interest rates.
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He asserts that this decision "skews the year-end interest rate upward, even above 8.50%. The upward pressures on inflation's convergence to the target—an increase in the minimum wage, rising inflation expectations, fiscal uncertainty, and tight global financial conditions—are the main factors that will continue to determine future decisions."
A Skandia analysis states that, looking ahead to the third quarter, the behavior of interest rates will be decisive. "At least two additional cuts by the Bank of the Republic are expected before the end of the year, in line with inflation that could approach 4.7%."
Alejandro Reyes González of BBVA Research said that "the Bank's Board's decision and message were more restrictive than those observed in previous months, even in the absence of fiscal mentions. This materializes the bias we had toward smaller rate cuts in the remainder of 2025."
According to Banco de Bogotá's Economic Research Department, there is a high indexation of rents and some downward resistance in services, which could lead to a practically lateral inflation trend for the remainder of the year. This will lead the technical team to revise upward its projected inflation path for 2025, currently at 4.4% .
An underfunded budget, optimistic revenue assumptions, tax reform at a time of political polarization, increased spending, and repeated changes in fiscal assumptions are sufficient reasons to limit the scope for interest rate reduction, the bank said.
Holman Rodríguez MartínezPortfolio Editorial
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