From Yahoo Finance: 2025-03-25 11:54:00

Colombia’s central bank may hold off on an interest rate cut due to the unexpected exit of Finance Minister Diego Guevara, causing market turmoil. Analysts now predict a hold at the upcoming meeting, shifting away from previous expectations of a rate cut to 9.25%.

Guevara’s replacement poses concerns over fiscal restraint ahead of an election year. Some strategists now anticipate the central bank to maintain rates, with strong economic growth and higher inflation expectations supporting this decision. The market faces uncertainty as the board remains split on rate cuts.

President Gustavo Petro’s spending needs and fiscal risks are in focus following Guevara’s resignation. Petro’s strained relationship with Congress complicates budgetary decisions, with Fitch Ratings downgrading Colombia’s credit score outlook to negative. Increased public spending threatens the country’s fragile fiscal position.

Colombia must reduce spending as Petro struggles to pass a tax bill. With a looming fiscal deficit and strained relationships in Congress, Petro faces pressure to deliver results amidst a weakening economy. Increased public spending could further strain Colombia’s fiscal accounts and economic stability.

Read more: Finance Chief’s Exit Pressures Colombia Central Bank to Hold Rates