The bumper minimum wage hike in Colombia will probably push inflation above 6% this year and prompt the central bank to hike its policy rate at this month’s meeting. We’ve pencilled in a 50bp interest rate hike to 9.75%. But market pricing – which implies that the policy rate will remain above 11% over the next two years – looks too aggressive. We’re expecting a cumulative 125bp of rate hikes (peaking at 10.50%) followed by a pause before a turn to easing in 2027.
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