“The acceleration of inflation above expectations has meant that the adjustments in the monetary stance implemented in recent months have had a limited effect on the real interest rate, which remains below the level required to achieve convergence to the 3% goal,” Espinosa said at the last monetary policy meeting.
At the meeting, which took place on May 12, the members of the Board voted to raise the rate by 50 basis points and raised inflation expectations. Now, it is estimated that it will converge to the goal -of 3% +/- one percentage point- until the first quarter of 2024.
“Increasing the rate of adjustment of the monetary stance to 75 basis points is necessary to achieve convergence to the goal within the planning horizon and strengthen the credibility of the commitment of this Central Institute with its priority mandate of maintaining price stability” said the deputy governor.
Espinosa highlighted that the recrudescence of inflationary pressures has caused the central bank to accumulate 11 consecutive occasions in which they have adjusted inflation expectations upwards.
“Long-term inflation expectations adjusted marginally above 3.5% for the first time since their measurement was recorded,” he pointed out.
This represents a warning of the risk of de-anchoring inflation expectations.
The minutes also disclosed that an unnamed Board member noted that one of the risks central banks face with high inflation is that inflation expectations become unanchored.
The same member considers that the decision of central banks in emerging economies to accelerate tightening reflects their priority to control inflation.
