Avila: Colombia govt forecasts inflation of 6% by 2026 year end

Colombia’s government and central bank have raised concerns over the trajectory of inflation, with forecasts suggesting it could reach 6% by the end of 2026. Annual inflation stood at 5.35% in January 2026, rising to 5.56% by March 2026, according to official data. This upward trend aligns with expectations outlined in the Banco de la República’s January 2026 Monetary Policy Report, which projected inflation to rise to 6.3% in 2026 before gradually declining to 3.7% by the end of 2027.

The acceleration in inflation has been driven by a combination of factors, including a 23% increase in the minimum wage, strong consumer demand, and indexation effects disproportionately affecting services. The non-food basket, particularly services, has seen the most significant price increases, with inflation rising by 40 basis points in January alone. Additionally, the central bank noted that fiscal stimulus and rising labor costs have contributed to excess demand and upward price pressures.

In response, Banco de la República has taken decisive action, raising the benchmark interest rate by 100 basis points in January 2026 to 11.25%. The central bank emphasized that the move is necessary to bring inflation back to target by 2027 and to stabilize the economy amid persistent inflationary risks. Analysts and policymakers remain cautious, as uncertainties related to the exchange rate, global economic conditions, and domestic fiscal policies continue to pose challenges to inflation control.