Colombian Central Bank seeks to lower inflation, but without hurry

Inflation in Colombia would close this year above the punctual target of 3%, but the trend would be reversed at the end of 2020, for which the Central Bank would adopt the necessary decisions without eagerness to avoid affecting the economy, he said Monday the manager of the issuing agency.

The logo of the central bank of Colombia is seen in Bogotá, Colombia

The logo of the central bank of Colombia in Bogotá, Colombia. REUTERS / Luisa Gonzalez

Reuters | Nelson Bocanegra

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Leer en español: Banco de la República de Colombia busca bajar inflación, pero sin prisa

Juan José Echavarría said that inflation would end this year at 3.6%, due to what he considers temporary shocks in the prices of food and regulated products.

"Total inflation is higher, 3.79% (annual to July), those are numbers with which we are not so satisfied," the official said in his quarterly presentation.

But the official revealed that the bank's technical team projects that inflation would end next year at 2.8%, for which the board would adopt the necessary measures without affecting the economic recovery.

"In short, news are a little less good than in the past (...), you have to go back to 3% and the bank will do the task to return to 3%, you don't have to do it immediately because that would drown the economy," he explained.

The bank is in a dilemma between containing inflation and maintaining the stimulus on the economy, at a time when it reduced its growth projection to 3% from a previous 3.5%, further from the government's goal of 3,6%.

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"The board is always in this balance of how much we want the economy to grow, but that has inflationary effects. If we want more growth we have to lower interest rates, but if there is high inflation we have to raise interest rates, that's why there are differences of opinion on the board, "explained Echavarría.

The Central Bank has kept its reference interest rate stable at 4.25% during the last 15 months.

Echavarría said the bank projects that the Gross Domestic Product (GDP) would have expanded by 2.8% in the second quarter, compared to the same period last year. DANE plans to reveal the data on Thursday.

"We need growth of more than 4.5% in the second half to be able to grow to 3% throughout the year and that is not easy," he concluded.