The projections of the technical team -on which the Central Bank bases itself to define its decisions on monetary politics-, moved inflation further away from the official long-term goal in Colombia, of 3%.
“The new projection suggests that in the second half of 2022 inflation would remain high and end at 9.7%, but throughout 2023 it would start to ease to close the year at 5.7%,” the report said.
“These forecasts are subject to great uncertainty, especially around the future behavior of external cost shocks, the degree of indexation of nominal contracts and the decisions made regarding the domestic price of fuels“, added the monetary authority.
The future government analyzes subsidies
The overflow of consumer prices -a global factor- is the fundamental reason why the Central Bank of Colombia increased its reference interest rate by 725 basis points since the upward cycle began, in September of last year, to the current 9%, its highest level since February 2009.
The government of the incoming president Gustavo Petro set inflation as one of its most immediate priorities, so it plans to launch new subsidies for the poorest.
The next finance minister Jose Antonio Ocamposaid last week that the ability to contain inflation with interest rate hikes is limited, because the reasons for the price increase are supply related.
In addition, the technical team of the Central Bank raised its projection of growth of the Gross Domestic Product (GDP) to 6.9% for 2022 from a previous forecast of 6.3%, although for 2023 it lowered it to 1.1% from a previous forecast of 3.1%.
Source: Ambito
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