In line with the projections of analysts and economic experts, the Board of Directors of the Banco de la República decided to raise interest rates in the face of persistent inflation.
The Issuer increased the interest rate this Friday by 100 basis points, which stands at 4%.
According to the Board of the Issuer, total inflation continued its upward trend, registering a variation of 0.73% in December, 30 bp higher than projected by the technical team. With this, consumer inflation closed the year at 5.62%.
“The results of inflation in 2021 induced a significant increase in inflation expectations measured from various sources, including inflation without food. The forecast by the technical team was also revised upwards and contemplates that total inflation and basic inflation reaches 4.3% and 4.5% in 2022, and settles at 3.4% and 3.6% in 2023”the board noted in its decision.
In its policy discussion, the Board of Directors also took into account the following elements:
– The economic monitoring indicator (ISE) for November showed that the economy continued to expand. In this context, the technical team reaffirmed its GDP growth forecast for 2021 at a rate close to 10%. With this growth, the GDP for all of 2021 would exceed that of 2019 and the existing excess capacity would be about to be closed. For 2022 the forecast would be around 4.3%.
– The current account of the balance of payments would close 2021 with a deficit of around 5.7% of GDP. By 2022, this imbalance would begin to moderate towards a level of 4.9% of GDP, in an international financial environment that is beginning to harden due to the acceleration in the pace of normalization of monetary policy in the United States and other advanced economies.
“With the decision adopted today, the monetary authority reiterates its commitment to the annual inflation target of 3%, for which it will continue to make the decisions required to ensure the convergence of inflation towards said target,” added to the Board of Directors of the Central Bank.
BRIEFCASE
