Blog BanRep | Balancing Inflation and Growth through the Implementation of Monetary Policy by Banco de la República
Why does Banco de la República raise or lower interest rates? The answer lies in the trade-off between controlling inflation and supporting economic growth. Learn about the factors that influence monetary policy decisions.
Publication Date:
11:35
In modern states, central banks are part of the public policy infrastructure that seeks to maximize societal well-being. The specific role of central banks is to control the general level of prices in order to uphold the currency’s purchasing power. Consequently, central banks focus on maintaining a low and stable inflation rate and conduct ongoing evaluations of all the factors that affect it. When inflation is predictable, low, and stable, companies and households can make more efficient investment and consumption decisions, allowing them to achieve the maximum level of economic activity that the economy can sustain with its available resources.
