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TL;DR

The Bank of the Republic increased its interest rate by 100 basis points to 10.25%, surprising analysts who expected a 50 basis point hike.
This move is attributed to a significant price shock from a large wage adjustment, raising inflation estimates above 6%.
A majority of the board prioritizes long-term economic sustainability, differing from those favoring rate cuts.
The decision aims to preemptively control inflation expectations and restore credibility after failing to meet inflation targets.
This marks a potential shift from a historically conservative central bank to one acting more firmly and prospectively.
The short-term market reaction has been moderately favorable, with less impact on longer-term rates and some appreciation of the Colombian peso.
Future rate decisions will depend on monthly inflation behavior and the reaction of inflation expectations.
Further rate increases are anticipated, with analyst and market expectations now revised upwards.

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