“That measures do not affect the growth of the economy”: Duque against the interest rates of the Banco de la República

This Thursday, March 31, the end of the month meeting of the Banco de la República was held, in which the board of directors decided to increase interest rates once again, from 4% to 5%. Faced with the news, President Iván Duque showed his position on the matter.

Duque's statements were given at the inauguration of the Panopticon Museum in Ibagué. “The decisions taken by the Banco de la República have to ensure that the growth of our economy is not slowed,” said the president. We need the economy to continue to grow to generate jobs and opportunities.”

The president called for an assessment of “how inflationary pressure will be reduced — which reached an annual variation of 8.01% in February — without the measures ending up affecting economic growth.”

At the same time, he stressed that the Banco de la República is an independent entity that has some tools, “but we have to be clear that what is generating this international inflation is not internal but external causes,” he added.

The decision of the Bank of the Republic

The rate increase in Colombia is taking place in the midst of an international context of monetary adjustment in the United States by the Federal Reserve faster than expected, in the face of a more intense and persistent inflationary process, now fueled by the effects of the conflict between Ukraine and Russia that adds to the remaining problems in the global supply chain.

According to the press release, issued by the bank, “total inflation continued its upward trend and registered an annual variation of 8.01 per cent in February, among which the food sector stands out, whose annual increase was 23.3%. Inflation without food or regulated increased from 2.49% in December 2021 to 4.11% annually in February.”

And it can also be read that: “In this context, the different measures of inflation expectations have continued to rise. In the case of economic analysts, the monthly survey by the Banco de la República showed that they expect a total inflation of 6.4% by 2022 and 3.8% by 2023″.

According to Agencia EFE, some analysts estimate that the Colombian bank could push the interest rate even to a level of 8% by the end of the year, well above the 5.75% projected in last month's poll. The issuing bank began the current bullish cycle in September last year, from a record low of 1.75% in which it maintained the interest rate to exit the crisis caused by the coronavirus pandemic.

Inflation in February

The National Administrative Department of Statistics highlighted that the largest price increases in February were recorded in the Education division, specifically in the subclasses of preschool and primary education, in which the variation was 4.72 per cent; secondary education with 4.62 per cent; and enrollment and enrollment for technical, technological and university degrees with 4.47%.

Second, there were price increases in the Food and Non-Alcoholic Beverages division, which registered a monthly variation of 3.26% and, in January, was the main sector contributing to inflation.

Again, within the food category, the largest price increase occurred in potatoes, with a variation of 16.14%; which decreased considerably compared to January, when it was 25.34%. The second and third place went to onions and tomatoes with variations of 12.94% and 12.37%, respectively.

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