Over the past few weeks, Colombia has once again become fully immersed in a far-reaching economic debate surrounding inflation and the impact that the minimum wage increase decreed for 2026 will have.
The government announced an increase of close to 23% in the minimum wage, a figure that far exceeds any estimate (5.1%) and that, due to its magnitude, has raised concerns among analysts and markets about potential effects on the Consumer Price Index (CPI).
Against this backdrop, central bank co-director Cesar Giraldo has put forward a thesis that breaks with one of the commonplaces of the discussion: He argues that the wage increase would not be the triggering factor behind inflationary behavior next year.
Giraldo’s statements, made in a column published in a local outlet, have brought to the forefront not only the technical debate on inflation but also the way in which economic consensus is constructed — and perceived — in Colombia. In a highly politically polarized economy, where macroeconomic figures are interpreted both through a technical lens and a sociopolitical one, his words have opened a broader reflection on which variables truly matter when it comes to unraveling the causes of inflation.
According to him, factors such as the dollar and interest rates will play a much more decisive role in the evolution of CPI during 2026 than the minimum wage increase itself.
Colombia central bank: minimum wage hike not driving inflation growth
In a column recently published on the El Unicornio portal, Giraldo stated clearly and directly that there is no robust evidence showing that an increase in the minimum wage, by itself, is the main driver of inflation.
He started from a simple but central idea: Inflation is a complex and multifactorial phenomenon, and reducing it to a single cause ignores how different economic variables interact. He noted that in multiple historical periods — both in Colombia and in other Latin American countries — real increases in the minimum wage have occurred without triggering significant accelerations in CPI.
The traditional logic, repeated year after year in national economic analysis, holds that higher wages raise production costs, which are passed on to final prices and thus fuel inflation. But according to Giraldo, this simplistic narrative overlooks the fact that other mechanisms may operate in the opposite direction or offset those effects.
For example, higher wages can also boost consumption and productivity, or redistribute demand without necessarily exerting uniform upward pressure on prices. In that sense, he stressed that an automatic or linear relationship between the minimum wage and inflation is not evident.
“It is not clear that an increase in the minimum wage increases inflation,” wrote the economist, drawing on both national and international empirical evidence. In fact, when analyzing historical data, he observes that in several periods the opposite occurs: When the real minimum wage rises, inflation tends to fall.
International experience reinforces this argument. In countries such as Brazil between 2004 and 2013, Chile between 2010 and 2018, Argentina between 2003 and 2011, Mexico between 2018 and 2023, and Colombia between 2022 and 2025, there were significant real increases in the minimum wage at the same time as inflation fell.
These cases do not prove that the minimum wage controls inflation, but they do refute the idea of a mechanical relationship between wage increases and inflationary acceleration.
Dollar and interest rates: the key drivers of inflation in 2026
If the minimum wage is not, according to Giraldo, the main engine of inflation in 2026, what is? For the economist, there are two factors that will carry decisive weight: The behavior of the dollar and the interest rates set by monetary policy. The exchange rate is a key mechanism in an open economy such as Colombia’s, as it affects the prices of imported goods and inputs that depend on external markets.
When the peso depreciates against the dollar, those costs translate into upward pressure on CPI. Conversely, a more stable or cheaper dollar can ease those tensions.
The other major variable is monetary policy, especially the benchmark interest rate set by the Bank of the Republic. At the end of 2025, the institution decided to keep this rate at high levels — above 9% — in a context of inflation still above its target range and with persistent upward price expectations.
If inflation remains firm or rises in 2026, the central bank is likely to adjust that rate, which would have wide-ranging implications for credit, investment, and price behavior. These interest-rate movements, more than the wage adjustment, are what, according to Giraldo, more strongly shape CPI.
The sociopolitical debate behind the numbers
Giraldo’s statements do not come at a time when Colombia’s public debate is heavily charged with political interpretations of economic decisions, especially given the imminence of the electoral — legislative and presidential — scenario that the South American country will experience in 2026.
The minimum wage increase has been defended by the government as a tool for social justice and inequality reduction, while the conservative opposition has criticized its adverse effects on the economy, both in terms of informality and potential inflationary growth.
However, various economists and analysts have warned that its magnitude could generate unintended side effects, such as inflationary pressures or constraints on formal hiring.
In this context, Giraldo’s assertions can also be read as an invitation to raise the quality of public debate and to detach it from simplistic slogans. By emphasizing that CPI responds to a much broader web of variables — including production, exchange rates, market expectations, monetary policy, and other external shocks — his position seeks to shift the focus of the discussion toward a more rigorous and less emotional analysis.
As the official start of 2026 approaches, economic projections and monetary policy decisions will continue to be closely scrutinized by markets, business leaders, workers, and politicians. The Central Bank, as the independent authority responsible for price stability, faces the difficult task of balancing these forces without being swept up by political pressures or simplistic assumptions.
Cesar Giraldo’s words, rather than settling the debate, have served as a reminder that macroeconomics rarely lends itself to single explanations and that understanding phenomena such as inflation requires looking at a diverse set of factors, both domestic and international.