Colombia Markets Jolted as 23% Wage Boost Fuels Rate Hike Bets

Colombian swap rates soared Tuesday after President Gustavo Petro announced a 23% increase in the minimum wage, stoking bets that the central bank will have to hike interest rates to combat the policy’s impact on prices.

Short-term interest rate swaps, a gauge of investor sentiment about monetary policy, rose by as much as 69 basis points, reaching the highest levels since March 2023 as markets digested Petro’s Monday evening announcement.

The move reflects beliefs that the decision will trigger significant monetary policy tightening next year, with Credicorp Capital expecting policymakers to raise borrowing costs to near 11% — from 9.25% ...