It is the general framework under which monetary policy operates in Colombia. Banco de la República makes interest rate decisions with the intent of bringing inflation to the target and contributing to maintaining economic activity (the economy’s output) close to its potential level (the level of production when the economy operates at full capacity).
When was an inflation target adopted in Colombia, and how has it changed since then?
Banco de la República began to publish inflation targets with the enactment of Law 31 of 1992. Although inflation targets were not met during the first few years, they did guide annual inflation towards a downward trajectory. Since 1999, the targets have been met more consistently and, despite the inflationary shocks experienced between 2000 and 2020, inflation has always converged to the target. In the context of recent inflationary shocks, the Board of Directors of Banco de la República remains committed to bringing inflation to the target. All of the above demonstrates the effectiveness of the target inflation framework and the anchor role that the target fulfills.
Related Blog BanRep: The Target Inflation Framework
Recent installments of this Blog introduced crucial elements of monetary policy, such as the inflation target and the monetary policy interest rate. These elements are the building blocks of what is known as the target inflation framework —the general structure under which monetary policy operates in Colombia...
