Despite expectations of more jumps in inflation, the central bank forecasts it will begin to decline in the coming months, with the South American country converging on the bank's long-term inflation goal of 3% by the end of 2024, Villar said.
Colombia's 12-month inflation hit 13.25% at the end of
January, the highest level in almost 24 years, despite efforts
by the central bank to cool the economy by hiking the benchmark
interest rate to a level of 12.75%, up from 1.75% in September
2021, when it began its upward monetary cycle.
"Unfortunately, inflation has continued to rise and in
Colombia we haven't seen the break in this trend, which has
already been seen in many other countries in the region and in
the world," Villar said at banking association Asobancaria's
treasury congress in Cartagena.
Villar highlighted declining inflation in the United States,
Brazil, Mexico, Peru and Chile.
Domestic demand persists despite signs of an economic
slowdown, Villar said, with price indexing on goods and services
due to last year's inflation and a 16% rise in Colombia's
minimum wage in 2023, as well as increases to the prices of
public services.
"Indexing mechanisms reduce the credibility of the (3%)
target and probably require a more restrictive monetary policy
than would otherwise have been needed to be successful in an
anti-inflation policy," Villar said.
Colombia's peso has depreciated sharply against the dollar, falling more than 20% in the last 12 months and 35% over the last two years, Villar said.
Most analysts expect the central bank's tightening cycle to end soon. The next time the board will take an interest rate decision is March 31. (Reporting by Nelson Bocanegra; Writing by Oliver Griffin and Paul Simao)
