Browsing by Author "Models and Capacities Development Section"
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Monetary Policy Report, January 2024(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 Section; Macroeconomic Modeling Department; Forecasting Section; Models and Capacities Development SectionReportes, Boletines e Informes. 2024-03-26Informe de Política Monetaria - January 2024Item Open AccessMonetary 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 SectionDuring 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. 2026-05-05Monetary Policy Report - April 2026Item Open AccessMonetary Policy Report - October 2024(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; Macroeconomic Modeling Department; Forecasting Section; Models and Capacities Development SectionInflation continues to decline, although it is still above the 3% target. Monetary policy measures and correcting factors that pushed prices up are helping inflation to continue approaching the target. Economic activity is recovering to a sustainable level, unemployment has decreased, and the external deficit continues to reduce. The monetary policy interest rate is compatible with inflation being close to the target by the end of 2025 and with the gradual recovery of economic growth. In the third quarter, headline inflation continued to decrease and is expected to continue doing so gradually to reach 3.0% by the end of 2025. In September, headline inflation decreased more than expected, standing at 5.8%, and it is projected to be 5.3% by the end of 2024. The decrease in the inflation projection is mainly due to the improvement in the supply of processed foods, lower adjustments in electricity and fuel prices, and declining international costs that favored the behavior of some goods prices. Service prices, particularly rents and food away from home, showed a slower pace of deceleration due, in part, to the effect of indexation. Inflation expectations show a downward trend over time, reinforcing a decreasing dynamic of inflation towards the target by the end of 2025. The expected decrease in inflation would continue to reflect the accumulated effects of monetary policy decisions and the correction of factors that pushed prices up in the past. The forecasts continue to face high uncertainty related to exchange rate variations, which are at the same time conditioned by volatility in international financial conditions and the challenges of fiscal adjustment in Colombia. Other relevant uncertainty factors are the pace of deceleration in the prices of some services such as rents, the behavior of food prices and some regulated goods and services, and the increase in the minimum wage for next year. Economic activity continues to show a recovery path compatible with the convergence of inflation to the 3% target. In 2024 and 2025, the Colombian economy is expected to grow by 1.9% and 2.9%, respectively. The Colombian economy has been gaining momentum throughout the year, a trend that is expected to continue over the course of the year. This recovery is mainly due to higher household consumption, supported by less restrictive monetary policy, better disposable income, and lower financial burden. A greater contribution from public civil works also explains the recovery. By 2025, the economy is expected to continue strengthening and reach a level close to its productive capacity, a behavior compatible with the convergence of inflation to the 3% target. This behavior would occur in the context of less restrictive domestic and foreign monetary policy. The unemployment rate remains low compared to the past, while employment has increased. Economic recovery and labor market resilience suggest that monetary policy decisions have contributed to sustainable growth and a reduction in inflation. Volatility in international financial conditions and the challenges of fiscal adjustment in Colombia are uncertainty factors for economic activity performance. The downward trend in inflation and its expectations has allowed the continued lowering of the monetary policy interest rate, which now stands at 9.75%. At its October meeting, the Board of Directors of the Banco de la República decided, by majority, to reduce the monetary policy interest rate by 50 basis points (bp), accumulating a reduction of 350 bp since December 2023. However, inflation and some of its expectations remain above the target, indicating the need to maintain a still contractionary monetary policy stance to bring inflation to its 3% target. Monetary policy decisions continue to support the sustainable recovery of economic growth and maintain the necessary prudence in light of persistent risks regarding inflation behavior. Box 1 - Evolución reciente del IPC de arriendos en Colombia (only in Spanish) Cárdenas, Julián; Rodríguez, Nicol Descargar PDF Box 2 - Expectativas de inflación y su grado de anclaje: ¿qué se puede inferir de las expectativas derivadas del mercado de deuda pública en Colombia? (only in Spanish) Muñoz-Martínez, Jonathan Alexander; Parra, Daniel Descargar PDF Box 3 - Comportamiento reciente de los ingresos externos por remesas recibidos en Colombia (only in Spanish) Sandoval-Herrera, Diego; Hernández-Peñaloza, MateoReportes, Boletines e Informes. 2024-11-06Informe de Política Monetaria - Octubre 2024Item Open AccessMonetary Policy Report - April 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; Macroeconomic Modeling Department; Forecasting Section; Models and Capacities Development SectionReportes, Boletines e Informes. 2025-05-06Monetary Policy Report - April 2025Item Open AccessMonetary Policy Report, October 2023(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 Section; Macroeconomic Modeling Department; Forecasting Section; Models and Capacities Development SectionReportes, Boletines e Informes. 2023-12-21Informe de Política Monetaria - October 2023Item Open AccessMonetary Policy Report - April 2024(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 Section; Macroeconomic Modeling Department; Forecasting Section; Models and Capacities Development SectionReportes, Boletines e Informes. 2024-05-03Monetary Policy Report - April 2024Item Open AccessMonetary 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 SectionReportes, Boletines e Informes. 2026-02-03Monetary Policy Report - January 2026Item Open AccessMonetary Policy Report - July 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 Section; Macroeconomic Modeling Department; Forecasting Section; Models and Capacities Development SectionReportes, Boletines e Informes. 2025-09-19Monetary Policy Report - July 2025Item Open AccessMonetary Policy Report - January 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; Macroeconomic Modeling Department; Forecasting Section; Models and Capacities Development SectionWhile inflation fell significantly in 2024, it continues above the 3% target. However, monetary policy measures and corrections in particular factors that exert upward price pressures have helped direct inflation toward the objective. Economic activity continues to recover and is expected to continue growing. The monetary policy interest rate is compatible with the convergence of inflation to its 3% target and the gradual recovery of economic growth toward more sustainable levels. Inflation has fallen significantly, from 9.3% in 2023 to 5.2% in 2024. During this year and into the next, inflation would continue to decline towards the inflation target. In the last quarter of 2024, inflation continued its downward path, ending the year at 5.2% with the help of smaller increases in the prices of some regulated goods and services (particularly utilities and fuel prices) and food away from home. Despite inflation’s significant decline throughout 2024, including in the last quarter and the positive performance of goods and food, headline inflation ended the year above the target. Monetary policy actions and the adjustment in economic activity contributed to inflation’s decline; however, indexation to a high inflation rate in 2023 and labor cost pressures constrained a more marked drop. Over the next two years, both headline and core inflation are expected to gradually approach the 3% target. The indexation of certain goods and services prices to lower inflation and the cumulative effects of monetary policy decisions would assist in steering inflation closer to the target. Nevertheless, inflationary pressures from the recent minimum wage increase and those resulting from the exchange rate’s behavior in a environment of high global uncertainty, could make the reduction of inflation slower than projected. Economic activity continues on a path of gradual recovery, helping inflation remain close to the 3% target and encouraging a stable labor market environment. Colombia’s economy continued to strengthen in the second half of 2024, backed by strong household consumption and signs of investment recovery. Increased spending on machinery and equipment, civil works construction, and the recovery of inventories would driving the improvement seen in investment. Private consumption (household consumption) has grown, supported by lower interest rates, improved access to credit, and increased disposable income. Economic activity is projected to grow 1.8% in 2024 and would continue to accelerate to 2.6% in 2025 and 3.4% in 2026, attributed to a monetary policy that would gradually ease as inflation falls. Consequently, the economy is foreseen to reach a level close to its productive capacity by 2026. The unemployment rate has decreased and is at low levels compared to its historical performance, concurrent with growing employment levels. Additionally, improvements in salaried employment have led to additional reductions in the informality ratios. Monetary policy interest rate reductions have been reflected in significant decreases in financial market interest rates, contributing to the the gradual recovery of credit. Since the end of 2023, the Board of Directors of Banco de la República has reduced the monetary policy interest rate by 375 basis points to its current level of 9.5%. The latter is compatible with inflation converging to its 3% target over the next two years and the gradual recovery of economic activity to sustainable levels. At its December meeting, the Board of Directors of Banco de la República decided by majority vote to lower the monetary policy interest rate by 25 basis points and concurred at its January meeting to maintain the benchmark rate at 9.5%. All monetary policy decisions have contributed to reducing annual inflation amid a backdrop of gradual improvements in economic activity and a stable labor market. The impact of the minimum wage increase on prices and the exchange rate behavior in an environment of high external and fiscal uncertainty are significant factors guiding inflation’s future trajectory. Consequently, information in this context will help define the future monetary rate decisions that will allow inflation to continue converging toward the 3% target. In this sense, monetary policy interest rate decisions continue to support the sustainable recovery of economic growth and maintain the prudence required given the continuing risks surrounding the future behavior of inflation. Box 1: Instantaneous infation in Colombia Edgar Caicedo García Wilmer Osvaldo Martínez Rivera Juan Camilo Vallejo Peña Gabriel Adolfo Garavito Plata Box 2: Estimated effects of the minimum wage on infation in Colombia Nicolás Martínez-Cortés Sergio Restrepo-Ángel Box 3: Energy demand as an indicator of industrial activity in Colombia Diana Cortázar Nicolás VillanuevaReportes, Boletines e Informes. 2025-03-17Monetary Policy Report - January 2025Item Open AccessMonetary 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 SectionReportes, Boletines e Informes. 2025-11-05Monetary Policy Report - October 2025