Inflation Targeting
Inflation targeting is a monetary policy scheme adopted since the beginning of the century by the Board of Directors of Banco de la República to comply with the constitutional mandate of preserving the purchasing power of the currency and promoting sustainable economic growth.
This strategy is based on explicitly communicating to the public that all the Bank's decisions will be focused on keeping inflation low and stable, thus anchoring inflation expectations in the specific target announced by the Board of Directors.
When the monetary authority has credibility and expectations of low inflation are consolidated, it is highly probable that these will have an impact on the behavior of economic agents and the population and, therefore, on the growth rate of prices, which would be close to the target established by Banco de la República.
The current inflation target set by the Board is 3.0% per year. Within this scheme, the public's expectations about future inflation play a key role since they are the basis for savings, investment, and spending decisions made by different economic agents that can affect consumer prices in the economy. Therefore, the Bank closely monitors the formation of the public's inflation expectations and communicates its monetary policy decisions in a timely and transparent manner.
