Browsing by Author "Forecasting Process Management and Assessment Section"

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    Monetary Policy Report - July 2026
    (Banco de la República) Office of the Deputy Technical Governor; Office for Monetary Policy and Economic Information; Programming and Inflation Department; Inflation Section; Macroeconomic Programming Section; Forecasting Process Management and Assessment Section; Macroeconomic Modeling Department; Forecasting Section; Models and Capacities Development Section
    Banco de la República’s technical staff presented the July 2026 Monetary Policy Report, which examines key variables underpinning the macroeconomic forecast, recent inflation dynamics, economic performance, and the outlook for the coming months. During the second quarter of 2026, inflation continued to rise, moving further from the 3% target, driven by higher labor costs, elevated household and public-sector spending, and higher food prices. At the same time, the Colombian economy recorded stronger growth, boosted primarily by consumption and investment in machinery and equipment. Inflation expectations remain high, and spending levels continue to exceed those the economy can sustain without generating additional inflationary pressures. During the remainder of 2026, prices are expected to rise before gradually moderating in 2027. In this environment, Banco de la República remains committed to taking the necessary measures to ensure the gradual convergence of inflation toward the 3% target. Please review the Report Inflation continued to rise during the second quarter, moving further away from the 3% target, driven by higher labor costs, robust consumption, and supply disruptions that primarily affected food prices. Looking ahead, these factors are expected to continue exerting upward pressure on prices during the remainder of 2026 and to gradually moderate in 2027. • In June, prices rose to 6.1% year-on-year, up from 5.6% observed in March. A similar pattern was observed in the less volatile components of the consumer basket (excluding food and regulated items). As a result, inflation continued to move further away from the 3% target. • The faster pace of inflation was driven by significant increases in wages and other labor costs, continued strong spending levels in the economy, and factors affecting agricultural supply, including the lagged effects of rainfall on crops, work stoppages, and higher production costs. • Some factors helped moderate these pressures, including the recent appreciation of the peso against the U.S. dollar and smaller increases in food-away-from-home prices. • The technical staff’s projections indicate that inflation is expected to continue rising through the remainder of 2026. This reflects the effects of higher labor costs, expected increases in food prices, the potential impacts of an El Niño event, rises in some public utility tariffs, and continued robust household spending. Beginning in 2027, price increases are projected to gradually ease and converge towards the 3% target over the following two years, partly as a result of Banco de la República’s monetary policy actions. • These projections are subject to a high degree of uncertainty. The main factors that could affect the future path of inflation include weather conditions, international conflicts, developments and the outlook for fiscal policy, and changes in the prices of certain regulated items, such as gasoline and energy. Economic growth in Colombia accelerated in the first quarter of 2026, mainly due to higher household and public-sector spending, and investment in machinery and equipment. Although economic activity is expected to continue to grow over the coming quarters, this expansion is projected to ease relative to the recent pace. This reflects, in part, a slowdown in the factors that have been boosting economic activity in recent months, amid persistent uncertainties both domestically and abroad. • During the first quarter of 2026, the Colombian economy grew by 2.2% annually, reflecting strong performance in both private and public consumption, as well as in certain investment components, predominantly machinery and equipment. • Household spending remained strong, principally noted in the purchase of durable goods such as vehicles, motorcycles, computers, and household appliances. • Investment increased, driven by higher purchases of machinery and equipment, although construction activity remained weak. • The labor market remained favorable as employment continued to increase and the unemployment rate remained at historically low levels. • Economic activity is expected to continue growing in 2026 and 2027, albeit at a more moderate pace, supported by favorable terms of trade, the gradual recovery of investment—particularly in infrastructure—and the contribution of international tourism. • The Colombian economy continues to face significant uncertainty related to the international environment, domestic fiscal conditions, and potential weather events that could affect production. The Board of Directors of Banco de la República remains committed to ensuring the gradual convergence of inflation to the 3% target. This objective is particularly important at a time when prices are rising rapidly, and household and government spending continues to exceed levels consistent with the economy’s productive capacity. • Inflation has increased and remains significantly above the target. • Economic activity and the labor market continue to show strong dynamism. This supports the growth of domestic spending and may contribute to inflation remaining elevated. • There is considerable uncertainty surrounding the factors that will affect prices and economic activity going forward. In particular, the main risks relate to weather events, including the intensity and duration of potential El Niño event effects, international conditions, and domestic fiscal policy. • Taking these considerations into account, the Board of Directors decided at its June meeting to increase the monetary policy interest rate by 75 basis points and, in July, maintained a restrictive monetary policy stance, leaving the rate unchanged at 12.0%. • Future monetary policy decisions will depend on new information regarding prices, economic activity, and the evolution of the risk factors described above. • Through these decisions, the Bank seeks to ensure the gradual convergence of inflation to the 3% target within a reasonable timeframe. Index of Boxes from the Report Box 1. Determinants of Core Goods Inflation in Colombia (excluding Food and Regulated Items): Evidence from a VAR Model under an Open-Economy Phillips Curve Framework
    Reportes, Boletines e Informes. 2026-08-04
    Informe de Política Monetaria - July 2026
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    Monetary Policy Report - January 2026
    (Banco de la República) Office of the Deputy Technical Governor; Office for Monetary Policy and Economic Information; Programming and Inflation Department; Inflation Section; Macroeconomic Programming Section; Forecasting Process Management and Assessment Section; Macroeconomic Modeling Department; Forecasting Section; Models and Capacities Development Section
    Reportes, Boletines e Informes. 2026-02-03
    Monetary Policy Report - January 2026
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    Monetary Policy Report - April 2026
    (Banco de la República) Office of the Deputy Technical Governor; Office for Monetary Policy and Economic Information; Programming and Inflation Department; Inflation Section; Macroeconomic Programming Section; Forecasting Process Management and Assessment Section; Macroeconomic Modeling Department; Forecasting Section; Models and Capacities Development Section
    During the first quarter, annual headline inflation (5.6%) increased and moved further away from the 3% target. Different economic agents expect inflation to continue increasing over the remainder of the year. Economic growth has moderated, but the level of country spending remains high and exceeds the long run sustainable level. The domestic demand continues to be driven by strong household consumption and fiscal stimulus of the government, among other factors. In this context of excess demand and inflation expected to continue increasing in 2026, the Board of Directors of Banco de la República raised the policy interest rate to support the convergence of inflation toward the 3% target in 2027. This decision reaffirms the commitment of Banco de la República to its constitutional mandate to maintain the purchasing power of the currency and achieve the highest possible sustainable level of output and employment. Inflation continued to rise in the first months of the year and moved further away from its target, driven by higher labor costs, strong domestic demand, and disruptions in the production of some goods. Additional increases in inflation are expected throughout the year; however, monetary policy actions would allow inflation to decline again and approach the 3% target in 2027, amid high global and domestic uncertainty. • In March, headline inflation stood at 5.6% and core inflation, which excludes volatile components such as food and regulated items, at 5.8%. In both cases, inflation was above its December level and continued to move further away from the 3% target. • The acceleration of prices in the first quarter of the year is explained by increases in labor costs following reflected in significant wage hikes; economic activity that remains strong and continues to show signs of excess spending; disruptions in food production related to adverse weather conditions and road blockages; and higher costs of international goods and inputs as a result of the conflict in the Middle East. • Inflation did not increase further due to downside surprises observed in the first months of the year in some regulated prices, such as gas, electricity, and fuels, as well as a lower exchange rate. • Inflation expectations of different economic agents (analysts, business, trade unions, academics, and investors in the government debt market) have increased since late 2025 and remain above the 3% target. • Inflation is expected to continue increasing throughout 2026 and reach 6.4% in December 2026. In 2027, inflation is expected to decline and gradually move closer to the 3% target, supported by the monetary policy decisions taken by Banco de la República. • The prolongation of the conflict in the Middle East could result in further upward pressures on international energy prices, fertilizer prices, and the international prices of some goods, as well as in less favorable financing conditions for the country. • The expected inflation remains surrounded by high uncertainty due to developments in the conflict in the Middle East, exchange rate behavior, the magnitude of the impact of the minimum wage increase, possible adverse weather conditions, and adjustments in the prices of certain regulated goods and services, among others. The Colombian economy grew by 2.6% in 2025, mainly driven by strong household consumption, the government fiscal deficit, and a robust labor market, while investment remained behind. For 2026, more moderate economic growth is expected in a highly uncertain global environment. • In 2025, the economy grew 2.6%, mainly driven by household consumption and the stimulus represented by the high fiscal deficit. • Household consumption remained high, supported by growth in inflows of remittances, strong performance of income from coffee sector, recovery in credit, low unemployment, and, in the short term, higher wages. • Investment showed weak performance due to lower dynamism across all its components (machinery and equipment, and housing and infrastructure construction). • Employment continued to expand, and the unemployment rate remained at historically low levels. However, employment growth in urban areas has been moderating. • Towards the end of 2025 and in the first months of the year, economic activity slowed, partly due to transitory disruptions in the production of some sectors. • In 2026, the economy is expected to continue growing (2.4%), with consumption remaining dynamic supported by a persistent fiscal deficit, strong foreign tourism, favorable labor market conditions, and expectations of high oil and coal prices. In contrast, remittances and income from the coffee sector would contribute less to economic growth. These factors, along with the effects of transitory production disruptions, would result in a more moderate pace of growth. • In 2027, economic growth would be somewhat lower than in 2026, in the context of a less dynamic external income and the accumulated effects of monetary policy, consistent with inflation returning to its target. • These projections remain highly uncertain, associated with the conflict in the Middle East and its effects on prices, as well as domestic risks related to the evolution of the fiscal situation. Recent actions by the Board of Directors of Banco de la República (JDBR) reaffirms its commitment to bringing inflation back toward the 3% target and to achieve the highest possible sustainable level of output and employment, in line with its constitutional mandate. • Economic spending continues to exceed the productive capacity of economy, and the unemployment rate remains at historically low levels. At the same time, headline and core inflation increased, facing significant upside risks, and expectations for consumer price increases remain above the 3% target. • In this context, the Board of Directors of Banco de la República raised the monetary policy interest rate by an additional 100 basis points in its March 2026 meeting, bringing it to 11.25%, and kept it unchanged at the April meeting. • The decisions of the JDBR seek to maintain the purchasing power of the currency, particularly that of the most vulnerable population, which lacks mechanisms to protect itself against inflation.
    Reportes, Boletines e Informes. 2026-05-05
    Monetary Policy Report - April 2026
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    Monetary Policy Report - October 2025
    (Banco de la República) Office of the Deputy Technical Governor; Office for Monetary Policy and Economic Information; Programming and Inflation Department; Inflation Section; Macroeconomic Programming Section; Forecasting Process Management and Assessment Section; Macroeconomic Modeling Department; Forecasting Section; Models and Capacities Development Section
    Reportes, Boletines e Informes. 2025-11-05
    Monetary Policy Report - October 2025