The Constitution and constitutional jurisprudence assign Banco de la República the specific mission of preserving the currency’s purchasing power. This translates into the objective of achieving and maintaining a low, stable inflation rate, in tandem with general economic policy, while taking into account economic growth.
What happens when inflation increases due to supply problems, such as weather events?
If the shock is temporary, the Board of Directors of Banco de la República can avoid reacting immediately. But if the price increase becomes persistent and affects inflation expectations, it may be necessary to raise interest rates.
Related BanRep Blog: Balancing Inflation and Growth through the Implementation of Monetary Policy by Banco de la República
Banco de la República is working to bring inflation back to the 3% target while ensuring that the impact of this convergence on economic growth remains as negligible as possible. Keeping inflation low and stable is a fundamental precondition for the economy to grow sustainably over time....
