The board of directors of Banco de la República unanimously decided to increase the monetary policy interest rate by 25 basis points (bp), bringing it to 13%
Inflation in January and February presented monthly increases lower than those observed throughout 2022. Annual food inflation began 2023 with progressive decreases that placed it at 24.1% in February, significantly below the data for December (27, 8%). These results suggest that the inflation rate is approaching its ceiling, from which the decline expected for 2023 would begin.
Inflation expectations are beginning to incorporate these positive news about the recent behavior of inflation. The survey of economic analysts carried out by Banco de la República in March showed that the 12-month inflation expectation fell from 7.7% in January to 7.2% in March in the median of the sample. Something similar was observed for the corresponding expectation at 24 months, which fell from 4.5% to 4.0%.
The economy monitoring index (ISE) registered an annual variation of 5.8% in January, higher than December’s (1.2%) and higher than expected by the technical team (3.2%). The technical team raised its 2023 GDP growth forecast from 0.2% to 0.84%. Despite this upward revision, economic activity continues to be characterized by a significant slowdown.
Between January and March, volatility in international markets has been exceptional, due to financial stability problems in the United States and some European countries. This situation has added uncertainty to the evolution of the world economy, but its effects on the Colombian economy have been limited.
With the decision adopted in today’s session, monetary policy continues with its objective of bringing inflation towards its target of 3%. Further decisions by the Board will depend on new information available.
“The inflation ceiling, in my opinion, I think has already been reached. What is clear is that in the coming months, even in March, the price reduction will begin,” said Finance Minister José Antonio Ocampo.
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