Colombia’s Central Bank yesterday raised the interest rate by 100 basis points to 11.25%, in a decision that deepens differences with the government of President Gustavo Petro over the direction of economic policy.
The increase, the second consecutive one of the same magnitude in just a few weeks, comes amid still elevated inflation and in an international context marked by the war in Iran and rising oil prices.
Nevertheless, yesterday’s controversial—though expected—decision by the issuing bank triggered an unusual reaction from the government’s representative on the board of directors.
After the decision—approved by 4 votes in favor and 3 against—became known, Finance Minister German Avila withdrew from the meeting of the governing body before it concluded and publicly questioned the decision, opening a crisis between the government and the central bank that goes beyond the technical debate and enters the institutional realm.
All-out conflict in Colombia between the Government and the Central Bank
Avila’s early departure from the Central Bank’s board has no recent precedent. As a mandatory member of this body, his participation is part of the institutional design aimed at coordinating economic policy without affecting the autonomy of the issuing bank.
The minister not only left the session but also communicated his disagreement before the institution made the official announcement. The gesture was interpreted as a political rupture with the monetary authority and made clear the level of accumulated tension.
From the government, it is insisted that the rate hike is excessive in the current context, as it makes credit more expensive, slows consumption, and affects investment. The Executive’s priority is to sustain growth at a time of economic weakness, something that has also occurred recently in other countries, such as in the United States, where President Trump maintains his personal dispute with the Fed over the same issue.
However, Colombia’s central bank maintains its diagnosis: inflation remains above the target—which is 3%—and requires a restrictive monetary policy to prevent price expectations from becoming unanchored.
According to the law governing the Bank, without the presence of the Finance Minister the Board would not be able to meet in the future. The government’s decision therefore prevents this body from continuing to operate going forward. In doing so, it obstructs its constitutional function as an independent institution, something that could have legal consequences if it materializes.
President Petro accuses the Bank of ‘engaging in opposition politics’
For now, tensions between the parties remain at their peak. Yesterday itself, the country’s president, Gustavo Petro, supported his minister’s decision to abruptly leave the bank’s board meeting. “The government withdraws from the board. We are not participants in a position of suicidal opposition,” he wrote in a comment on his account on the social network X.
Petro later added a serious accusation, stating that “the majority of the Bank’s board of directors is only seeking to increase the profits of the holders of public debt, who are the same bankers, and they make the people pay those profits through the national budget.”
For his part, the Bank’s manager, Leonardo Villar, rejected the accusation: “The only one who does have interests is the minister, who answers to the president,” he said yesterday at the press conference in which he announced the interest rate increase.
In successive comments on social media, Petro lashed out at the Bank’s decisions, even accusing its board members of “engaging in opposition politics.”
He ultimately attached a comparative chart of recent years—from 2010 to today—between inflation and interest rates to, he said, demonstrate that claim, and which shows that despite the decline in inflation in recent years, rates remain well above past periods when inflation was even higher than it is now.
“Completely outlandish the position of the four members of the Bank’s board. Putting the standard of living of the Colombian population and their employment at risk. The technical basis for making this decision is a survey of 26 stakeholders, who are the owners of the banks. The Bank has lost its real independence,” he exclaimed.
Completamente estrafalaria la posición de los 4 de la junta directiva del Banco de la República
Poner en riesgo el nivel de vida de la poblacion colombiana y su empleo.La base técnica para tomar esta decisión es una encuesta a 26 referentes , que son los dueños de los bancos.… pic.twitter.com/vo3X0BiteO
— Gustavo Petro (@petrogustavo) April 1, 2026
A year of disagreements between the Government and the Central Bank
The clash between the two institutions has been building over the past year. Since early 2025, the Government has repeatedly questioned the Central Bank’s strategy, particularly regarding interest rates.
The administration argues that inflation in Colombia is largely driven by external and supply-side factors, such as energy and food prices, which limits the effectiveness of rate hikes. Under this approach, tightening monetary policy would have a limited impact on prices and a significant one on economic activity.
The central bank, for its part, has defended a more orthodox stance. Its argument is that, regardless of the origin of inflation, keeping it under control requires clear signals to the market and a preemptive response to preserve credibility, despite acknowledging that the real effects of today’s decisions will not have effective consequences until next year.
The differences have been expressed both in public statements and within the board, where votes have become increasingly divided, especially between the four members—who hold the majority in votes—who usually face off against the other three, who favor less aggressive measures. The decision to raise rates by 100 basis points on two consecutive occasions ultimately deepened the rift.
Legal and institutional risks of a deadlock
The minister’s withdrawal raises significant legal questions. The Constitution establishes that the finance minister is part of the Central Bank’s board of directors, so his absence could be interpreted as a failure to fulfill his duties.
Legal experts note that, if this situation persists, disciplinary actions or even lawsuits before constitutional courts could arise to define the scope of his obligations.
It also poses a problem for institutional functioning. Although the board can deliberate with a sufficient quorum, the absence of the Government’s representative breaks the intended balance between technical autonomy and coordination with fiscal policy and could block the entity’s future deliberations.
The risk of a jurisdictional conflict between the administration and the central bank is more open than ever. In an extreme scenario, the dispute could move to the courts, with implications for institutional stability.
The confrontation adds uncertainty to an already complex economic environment. The lack of coordination between fiscal and monetary policy may affect investor confidence and increase market volatility.
In the short term, the interest rate level at 11.25% will continue to make credit more expensive for households and businesses. This may translate into lower consumption, a drop in investment, and weaker growth in the coming months.
In the medium term, the key factor will be credibility. If markets perceive that the central bank’s independence is at risk, they could demand higher risk premiums, making the country’s financing more expensive.