Monetary Policy Report - July 2024

Office of the Deputy Technical Governor; Office for Monetary Policy and Economic Information; Inflation Section; Macroeconomic Programming Section; Advisors and Associate Researcher with the Programming and Inflation Department; Macroeconomic Modeling Department; Consultant and Researchers associated with the Macro-Economic Models Department

Monetary Policy Report - July 2024

Main Macroeconomic Forecast Variables July 2024 (95.36 KB)

Monetary Policy Report - July 2024 (2.98 MB)

Box 1 (661.85 KB)

Informe de Política Monetaria - July 2024

Date published

2024-08-02

Authors

Office of the Deputy Technical Governor
Office for Monetary Policy and Economic Information
Inflation Section
Macroeconomic Programming Section
Advisors and Associate Researcher with the Programming and Inflation Department
Macroeconomic Modeling Department
Consultant and Researchers associated with the Macro-Economic Models Department

ISSN

2711-2128

Document language

eng

Metrics

downloads: 0

abstract_views: 0

Ver PlumX Metrics

Las opiniones contenidas en el presente documento son responsabilidad exclusiva de los autores y no comprometen al Banco de la República ni a su Junta Directiva.

The opinions contained in this document are the sole responsibility of the author and do not commit Banco de la República or its Board of Directors.

Abstract

1.1 Macroeconomic Summary As anticipated, headline inflation during the second quarter remained stable at 7.2%, while core inflation (6.0% in June) continued to decline at a slightly faster pace than expected. The cumulative monetary policy effects and the unwinding of specific shocks that affected prices continue to assist in the convergence of inflation to the 3% target. In the second quarter, the increase in food prices was greater than expected due to a rebound in the perishable food basket, offset by a larger-than-foreseen decline in the year-to-year variation of other CPI baskets. This Report projects a higher annual increase in the food CPI versus the April yearend estimates due to recent supply shocks that are expected to gradually dissipate and to increases in international transportation costs, notwithstanding favorable weather conditions. Increases in the CPI for regulated items would continue to ameliorate, albeit at a more gradual pace, given higher-than-expected energy and transportation price adjustments. As foreseen in the previous Report, core inflation would continue to decline, falling to 5.0% by the end of the year. However, this forecast faces upside risks originating mainly from housing rents. Should these prospects materialize, noting that food and regulated items have a particularly high level of uncertainty, headline inflation for 2024 (5.7%) would surpass its April estimate (5.5%). As a result, the indexation of certain CPI groups to higher inflation could play a part in delaying the convergence of inflation to the target in 2025. Nevertheless, the collective effects of monetary policy, together with an output gap expected to fall in negative territory – more so than projected in the previous Report – along with modest exchange rate pressures, would assist in maintaining inflation’s downward trend, placing it at 3.0% by yearend 2025. These forecasts remain highly uncertain, mainly associated with the future behavior of the exchange rate, the degree of persistence of the supply shocks that affected food prices, and the outcomes of the provisions regarding adjustments in public services and transportation, among others.