The Monthly Expectations Survey of Economic Analysts for July anticipates that the Board of Directors of the Bank of the Republic will approve a new increase in the interest rate, up to 12.5%, in its meeting on July 31. Experts believe this will be the last increase of the monetary tightening cycle.
The economic analysts consulted by the Bank of the Republic foresee that in the upcoming meeting of the Board of Directors, on July 31, a rise in the monetary policy interest rate to 12.5% will be approved. According to the Monthly Expectations Survey of Economic Analysts for July, this increase would be the last of the tightening cycle, as the rate would remain at this level until the end of 2026.
End of the cycle of increases
Those surveyed project that the interest rate will close the year at 12.5%, with no new increases after July. Starting in early 2027, it would begin to gradually decrease, reaching 10.75% by December 2027. This outlook reflects analysts' confidence that inflation will start to ease, allowing a shift in monetary policy.
The Bank of the Republic has been raising rates since 2025 to contain rising prices. With this new increase, the rate would accumulate a rise of 2.5 percentage points since the beginning of the cycle, which started from 10%.
Inflation rises and delays convergence
The survey also adjusted its inflation forecasts upwards. For the end of 2026, analysts expect inflation of 6.61%, compared to the 6.48% projected in the previous survey. This rise has been reflected in recent data: Dane reported that the year-on-year inflation for June stood at 6.14%, up from 4.82% in June 2025. This is the first record above 6% in 22 months.
Long-term expectations also remain high. Analysts estimate that inflation will converge to the target range (2%-4%) only in 2031, in five years. By December 2027, the expected inflation is 4.95%, still above the upper limit of the target range. Over a 24-month horizon, expected inflation is at 4.07%, nearing the target, while at 60 months it would stabilise at 3.32%, in line with the 3% goal.
Impact on businesses and consumers
For businesses and households, this rate increase implies a rise in credit costs. Mortgage loans, consumer credit, and business financing will see their costs increase, which may slow down investment and consumption. However, the end of the cycle of increases offers some certainty: once the rate peaks in July, rates could stabilise before starting to decrease in 2027.
Analysts recommend that businesses review their debt structures and consider taking out interest rate hedges to protect against volatility. For consumers, it may be a good time to lock in rates on mortgages before rates continue to rise, although the expectation is that they will not do so beyond July.
According to the Monthly Expectations Survey, "the monetary policy interest rate would rise to 12.5% in July and remain at that level until the end of the year," indicating that the upward cycle is nearing its end.
The next meeting of the Board of Directors of the Bank of the Republic will be on July 31. Markets will be attentive to the decision and signals regarding the future path of rates. If the last increase is confirmed, the focus will shift to the speed at which inflation will allow for cuts to begin in 2027.
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