Colombia's central bank shocks with 100-bp rate hike to 10.25%

By Nelson Bocanegra and Carlos Vargas

BOGOTA, Jan 30 (Reuters) - Colombia's central bank raised its benchmark interest rate by 100 basis points to 10.25% on Friday, its first hike in nearly three years and a larger move than most analysts had expected, as policymakers pointed to rising inflation ?pressures, a sharp jump in inflation expectations and mounting fiscal and external risks.

The increase was approved by a ?divided seven-member board: four directors voted for the 100-basis-point hike, two voted for ?a 50-basis-point cut and one backed holding the rate unchanged, ?according to the ?central bank's statement.

A Reuters poll found that 15 of 26 analysts predicted a 50-basis-point hike to 9.75%, with ?only one predicting a 100-basis-point jump.

In its ?discussion, the board cited December inflation of 5.1%, slightly below end-2024, but noted that core inflation picked up to 5.02% in December, ?from 4.85% in November. The bank's long-term ?inflation target ?is 3%, plus or minus one percentage point.

President Gustavo Petro raised the minimum wage by 22.7% for this year, which is expected to stoke ?prices. Analysts in a Reuters poll on Friday predicted consumer price rises will be 6.32% at the close of this year.

The bank's technical team has revised its inflation outlook for this year to 6.3%, a significant uptick from a previous?4.1%, board head Leonardo Villar said during a press conference?following the decision. Economic growth in ?2025 ?will have reached 2.9%, but will fall this year to 2.6%, he added.

The bank flagged a widening current account deficit, estimating it reached 2.4% ?of GDP in 2025, up from 1.6% in 2024, mainly due to faster import growth fueled by strong domestic demand alongside only modest export growth.

The statement also highlighted elevated external uncertainty, citing risks from escalating trade conflicts, U.S. migration measures, geopolitical tensions and perceptions of Colombia's sovereign risk.

"The government declares its total disagreement with the decision," said Finance Minister German Avila, ?who represents the government on the board, saying economic growth was on a sustainable path and higher rates could hurt consumption.

Petro has repeatedly pushed to cut the rate.

(Reporting by Nelson Bocanegra and Carlos Vargas, ?Writing by Sarah Morlan, Kylie Madry and Julia Symmes Cobb; Editing by Alistair Bell)