Colombia’s consumer price index (CPI) rose 5.56% year on year in March. This was above the forecast of 5.47%.
The March reading was 0.09 percentage points higher than expected. The data compares actual inflation with the market estimate for the same month.
Policy Outlook After Inflation Surprise
With March’s annual inflation coming in at 5.56%, we are now looking at a number that surpassed market consensus. This print disrupts the steady disinflationary path we observed for most of 2025, when inflation fell consistently from over 8%. This surprise will force a reassessment of the central bank’s policy trajectory for the remainder of the year.
We believe the central bank, which cut its policy rate to 6.75% last month, will now be forced to pause its easing cycle. The market had been pricing in at least two more 25-basis-point cuts by the third quarter, a view that now seems highly unlikely. Consequently, we expect to see receiving interest rate swaps reprice higher, particularly in the shorter end of the curve.
A more hawkish central bank outlook is typically supportive for the local currency. The Colombian Peso, which had already shown strength by breaking below 3,900 per dollar in late 2025, could see renewed buying interest. We are now watching for a potential move in USD/COP towards the 3,820 level, and volatility may increase, making options strategies attractive.
The prospect of higher interest rates for a longer period poses a headwind for Colombian equities. This shift complicates the recovery for the MSCI COLCAP index, which posted a modest 4% gain in the first quarter of this year after a strong 2025. We anticipate potential downside pressure on index futures as higher financing costs could dampen the 2.8% economic growth that had been forecast for 2026.
