Colombia's central bank, Banco de la República, cut its benchmark interest rate by 25 basis points to 7.5% on Dec. 16 after annual inflation fell for the fourth consecutive month in November to 5.96%.
The central bank noted, however, that inflation still remains above its target range of between 2% to 4%.
Four directors at the bank's seven-member board voted for the rate hike, while the remaining three wanted to hold the rate steady.
In a statement, the central bank said its final decision took into account the lower-than-expected GDP growth of 1.2% in the third quarter compared to a year earlier and a 1.1% decline in domestic demand due to lower investments and a slowdown in consumption.
"These results and the new figures of economic activity for the fourth quarter suggest that economic growth in 2016 could be slightly lower than 2.0%," the bank said.
It added that "given the negative effects of the fall in oil prices on public finances, the structural tax reform bill presented by the Government to the Congress is a crucial action that contributes to long-term growth, to strengthen fiscal sustainability, to maintain macroeconomic stability, and to preserve the credit rating."
This was the central bank's last policy decision under the leadership of Governor José Darío Uribe Escobar, who will be replaced by economist Juan José Echavarría Soto in January 2017.