The bank’s analysts say that the increase still doesn’t include the effects of Gustavo Petro’s 23% decreed increase in the country’s legal minimum wage.

According to a report by the Economic, Industry & Market Research Area of Bancolombia (BVC: BCOLOMBIA, NYSE: CIB), annual inflation in Colombia rose by 25 basis points to 5.35% in January 2026. This monthly increase of 1.18% represents the highest inflation level since October 2025.

The data, originally prepared by the National Administrative Department of Statistics (DANE), indicates that 70% of the January inflation print was concentrated in the services and regulated components. These two sectors contributed 83 basis points of the total 118-point monthly increase, largely driven by the initial stages of annual cost pass-throughs associated with high indexation.

Businesses should prepare for more intense inflationary pressures in February and March 2026 as the full impact of the minimum wage increase and renegotiated supplier contracts take effect.

Sectoral Impacts and Service Acceleration

Annual inflation in the services category accelerated by 40 basis points to reach 6.33% in January, its highest level since April 2025. The monthly variation of 1.18% in this sector was nearly double the historical January average of 0.63%.

Bancolombia analysts attribute this acceleration to early adjustments linked to the 23% minimum wage increase for 2026 and indexation to previous years’ inflation. Notable increases were observed in:

• Full-service restaurant meals: 3.36%
• Prepared meals consumed outside the home: 2.38%
• Domestic services: 5.16%
• Imputed rent: 0.43%

The regulated group also saw an acceleration, with annual inflation rising to 5.47% from 5.40%. This was primarily explained by adjustments in urban transportation, vehicle fuels, natural gas, and tolls.

Food and Goods Price Momentum

Annual food inflation edged up slightly to 5.10% from 5.06%. Perishable foods saw an acceleration to 4.69% due to seasonal and supply factors affecting products such as tomatoes, potatoes, and plantains. Processed foods, including beef, milk, and poultry, reflected early-year cost pass-throughs, though annual inflation in this sub-group eased to 5.23%.

The goods category reached its highest level since March 2024, at 2.93%. Price hikes in this segment were driven by new taxes on alcoholic beverages enacted under the economic emergency, as well as pharmaceutical products. Conversely, price declines were noted in personal hygiene products, vehicles, and appliances, benefiting from the recent appreciation of the exchange rate.

Monetary Policy Implications and Forecasts

The Central Bank of Colombia (Banco de la República) faces continued challenges in converging toward its 2% to 4% target range. Core inflation, excluding food and regulated items, reached its highest level since November 2024, indicating persistent upward pressure.

Bancolombia forecasts that year-end inflation will reach 6.4%. The analysts suggest that the full impact of the minimum wage increase has not yet been reflected in consumer prices, as many firms are still operating with inventories purchased at previous cost levels.

Consequently, the Central Bank is expected to continue raising its monetary policy rate to anchor inflation expectations. Bancolombia anticipates the policy rate could rise to 11%, noting that the challenging outlook introduces a hawkish bias to future decisions.

Photo courtesy Bancolombia

The surprise ruling is a temporary win for employers, but creates even more uncertainty. The Council of State has ruled that Petro’s 23% raise in minimum wage violates technical limits established by law.

The Colombian Council of State has issued a provisional suspension of the government decree that established a 23% increase in the national minimum wage for 2026. The judicial decision halts the implementation of the adjustment, which had set the monthly salary at $1,750,905 COP plus a transportation assistance allowance, totaling approximately $2,000,000 COP.

The suspension follows several legal challenges arguing that the administration of President Gustavo Petro exceeded its authority by setting an increase significantly higher than the 5.1% inflation rate recorded in 2025. The court found reasonable doubt regarding whether the executive branch adhered to the technical criteria mandated by Law 278 of 1996, which requires adjustments to be based on inflation, productivity, and economic growth.

Immediate Regulatory Timeline and Compliance

The high court has granted the Ministry of Labor an eight-day window to issue a new provisional decree. During this period, employers are instructed to maintain current payment levels until the new administrative act is published.

Legal experts emphasize that the ruling does not have retroactive effects. Juan Pablo López, managing partner at López & Asociados, told daily El Tiempo that payments made between January 1 and the issuance of the new decree remain valid. Companies are legally prohibited from discounting or requesting the return of the additional 23% already paid to employees for January and the first half of February.

Vicente Umaña, partner at Posse Herrera Ruiz, clarified to the same publication that while payments currently due must honor the 23% increase, the forthcoming decree will likely establish a lower rate. This adjustment will subsequently impact other costs indexed to the minimum wage, including administration fees, fines, and transport costs.

Economic and Labor Market Projections

The initial 23% hike sparked concerns among economic think tanks regarding formal employment and inflation. Fedesarrollo published an analysis suggesting that such an increase could lead to the loss of up to 600,000 formal jobs and a three-percentage-point rise in labor informality.

Economic researchers at Bancolombia (BVC: BCOLOMBIA, NYSE: CIB) estimated potential job losses could reach 734,000. Their data highlights specific sectors at risk:

• Professional activities: 390,537 jobs
• Commerce: 71,917 jobs
• Construction: 54,537 jobs
• Manufacturing: 42,774 jobs

According to Medellín-based El Colombiano, Camilo Cuervo, partner at Holland & Knight, noted that the Council of State’s language suggests the original decree may not survive a final merits review. Luis Fernando Mejía, CEO of Lumen Economic Intelligence, indicated that the suspension could serve to stabilize price escalations observed in early 2026.

Business Community and Government Reactions

The National Federation of Merchants (FENALCO) and the National Business Association of Colombia (ANDI) have addressed the ruling. Jaime Alberto Cabal, president of FENALCO, described the suspension as a necessary correction to an adjustment that did not reflect economic realities. Bruce Mac Master, president of ANDI, stated that the ruling establishes important jurisprudence for technical responsibility in wage setting.

Mauricio Montealegre, partner at Pérez-Llorca Gómez-Pinzón, observed that while the government could theoretically attempt to justify the same figure in a new decree, the president has called for a new concertation table to align with the court’s criteria.

Guidance for Employers

Business owners and human resources departments operating in Colombia should consider the following steps:

• Maintain Current Payroll: Continue paying the 1,750,905 COP base salary until the new decree is officially published in the government gazette.
• Avoid Retroactive Deductions: Ensure that no attempts are made to recoup the 23% increase already paid to staff for previous periods.
• Monitor the New Decree: Prepare for a mid-month adjustment in the second half of February, as the new rate will apply immediately upon publication.
• Contractual Review: Assess contracts and service agreements tied to the minimum wage to prepare for downward adjustments in indexed costs if the new rate is lower.

Photo © Loren Moss

Welcome to the weekend one and all. A week dominated, or at least that was the perception, by politics. Who will be standing in which primary and who will choose / have to go direct to Round 1 in May. Aside from that, the debate over the impact of the 23% minimum wage increase, continues.

1. How was January inflation from Departamento Administrativo Nacional de Estadística – DANE Colombia ?

2. Is the full impact of the Minimum Wage increase now baked in according to Bancolombia ?

3. How were Exports for December from Departamento Administrativo Nacional de Estadística – DANE Colombia ?

4. How many Presidential candidates do we expect to see on the ballot in May ?

5. Why is Petro again discussing Emergency Economic powers ?

6. What are FENALCO & ANDI – Asociación Nacional de Empresarios de Colombia saying about vehicle sales in 2026 ?

7. How have the markets been this week ?

That is our lot for this weekend. Wherever you are, please have a relaxing and peaceful day.

my regards

Rupert