Banco de la República lifted its benchmark interest rate by 75 basis points to 12% on Tuesday, marking the first increase since March. The decision follows a court ruling that removed the government's veto power over monetary tightening, while the presidential election outcome reduced concerns about central bank interference.

President Gustavo Petro had pressured the institution to keep rates unchanged in April, but board members continued warning about inflation risks from fiscal deficits and record minimum wage hikes. The central bank faced months of institutional turmoil after Finance Minister Germán Ávila threatened to boycott board meetings, which would have paralyzed monetary policy decisions.

Conservative candidate Abelardo de la Espriella's victory over leftist senator Iván Cepeda in the runoff eased investor worries about prolonged pressure on the bank. Colombian bonds and currency rallied after the announcement, signaling market approval of the central bank's regained autonomy.

Annual inflation accelerated to 5.8% in May, reaching its highest level in nearly two years. Economists surveyed by the central bank expect inflation to end the year near 6.5%, well above the official 3% target with its 1 percentage point tolerance band. The rate hike reflects mounting pressure to anchor price stability expectations.