Browsing by Author "Models and Capacities Development Section"
Now showing 1 - 6 of 6
Results Per Page
Sort Options
Item Open Access
Monetary 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, 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, 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 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 SectionIn March, inflation decreased - although less than anticipated - and remains above the 3% target. Over the next two years, it is expected that inflation will continue to decline, converging gradually toward the target. In March, annual headline inflation stood at 5.1% - slightly above the forecast - due to upward surprises in regulated items such as gas and urban transportation, as well as increases in processed foods. The decline in inflation is largely attributed to the cumulative effects of a still-restrictive monetary policy stance, indexation to lower inflation rates, and the moderation of international prices for certain goods and raw materials. However, inflation remains above 3% due to continued significant price adjustments across all baskets, except for the goods group excluding food and regulated items. Core inflation, which excludes more volatile items such as food and regulated items, continued to decline, falling slightly more than presumed to 4.9% in March. For the remainder of 2025 and into 2026, headline inflation is expected to continue its downward trend amid a recovery in economic activity, albeit with excess productive capacity, price indexation to lower inflation rates, and moderate exchange rate pressures. Under these conditions, inflation is projected to converge to the 3% target by yearend 2026. The inflation forecast remains subject to high uncertainty, particularly due to the behavior of prices for some regulated services and exchange rate dynamics in a context of significant fiscal challenges. This uncertainty has recently increased due to potential impacts stemming from changes in U.S. trade policy. In the first quarter of 2025, economic activity would have recovered more than expected; however, it faces future adverse shocks originating from the external environment. In 2024, the Colombian economy grew by 1.7%, broadly in line with projections. This performance occurred against a backdrop of declining interest rates, lower (though still above-target) inflation, and increased household disposable income. Available information for the first quarter of 2025 indicates stronger-than-expected economic activity, driven by higher growth in private consumption and investment. As a result, GDP is estimated to have grown by 2.5% year-on-year during the quarter. For the remainder of the year, it is anticipated that higher incomes from higher prices of certain agricultural products such as coffee, robust remittance inflows, and strong foreign tourism will bolster economic activity. The latter would be complemented by a gradual recovery in credit amid declining real interest rates and credit risks. However, recent tariff increases in the United States and uncertainty about future trade policy have dampened global economic activity, raised global risk perceptions, and increased the cost of external financing, factors that are expected to negatively affect Colombia’s exports of goods and services. Considering the stronger-than-expected growth in the first quarter and the adverse external shock linked to global trade developments, the economic growth forecast for 2025 remains at 2.6%, while the projection for 2026 has been revised downward to 3.0%. The unemployment rate continues to decline and remains at low levels, while employment has increased significantly, particularly in the non-salaried segment, leading to a rise in the informality rate. The Board of Directors of Banco de la República (JDBR) continues to adopt a cautious approach to monetary policy, consistent with the aim of guiding inflation toward the 3% target and supporting a sustainable recovery in economic activity. At its March meeting, the Board of Directors of Banco de la República (JDBR) opted to lower the monetary policy interest rate to 9.25%, following a decision to keep it unchanged in January. Although inflation has declined, it remains above the target and is subject to significant risks, warranting a cautious approach to interest rate decisions to ensure a sustained convergence of inflation toward the 3% target. Domestic fiscal challenges and external uncertainty pose significant upside risks to Colombia’s external financing costs, exchange rate, and inflation. These factors underscore the need for a prudent monetary policy stance to support the path of inflation to the target and the sustainable recovery of economic activity. Box 1 - De la recuperación al ajuste: dinámica reciente de los sectores productivos en Colombia (only in Spanish) Barbosa-Buitrago, Johanna; Pulido-Mahecha, Karen L. Descargar PDF Box 2 - Evaluación del error de pronóstico macroeconómico para 2024 (only in Spanish) Muñoz-Martínez, Jonathan Alexander; Pérez-Amaya, Julián MauricioReportes, Boletines e Informes. 2025-05-06Monetary Policy Report - April 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 - 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 2024