Banco de la República rates at 12.25%: what changes for the investor

From the cut to the hike

At the April 30, 2025 meeting, the Banco de la República's board cut its monetary policy rate by 25 basis points, down to 9.25%. It kept it at that level for the rest of 2025, although with split votes at the last meeting of the year.

In 2026 the course changed. According to the bank's minutes, the board raised the rate 100 basis points, to 10.25%, in January 2026. And on September 30, 2026, by majority, it increased it another 25 basis points, up to 12.25%, according to the BBVA Research report.

Why rates rose

The central bank uses the interest rate to control inflation. According to BBVA Research, the September 2026 decision responded to annual inflation rising to 6.2% in August and worsening inflation expectations, despite signs of economic slowdown and a weak labor market.

When money is more expensive, consumption and credit tend to moderate, which helps curb prices. The cost is less economic dynamism.

Effects on housing and credit

Higher rates usually make mortgage and consumer loans more expensive. For those buying property with debt, a higher payment reduces the margin between rental income and loan payment. For the market, fewer buyers with credit can put downward pressure on housing demand.

It also changes the comparison between alternatives: when term deposits pay more, the required return on other assets also rises.

Investing without leverage

One difference between fractions and traditional property purchases is that they don't require credit: you buy from 50 USD with your own money. This eliminates the risk of rate changes in the installment, although it doesn't eliminate the inherent risks of the asset, such as occupancy, maintenance, or market value.

Also, CityFraction assets are in various cities and currencies. Colombia's monetary policy affects assets in Colombia, while the Federal Reserve influences Miami, and the European Central Bank impacts Madrid and Capri.

• Compare the estimated return of an asset with low-risk alternatives.
• If you use credit to invest, calculate the installment with rates higher than current ones.
• Diversify across economies with different rate cycles.

What to watch in the coming months

Upcoming decisions will depend on inflation, expectations, and fiscal situation. Analysts consulted by the Colombian press have predicted that rates are unlikely to drop soon. It's advisable to follow the Central Bank's announcements and the monthly CPI from DANE.

In short

High rates signal that inflation is not yet under control. For investors, this reinforces the importance of not relying on expensive debt, diversifying across currencies, and analyzing each asset with its own numbers.

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