Gobierno alista otras medidas para suavizar las presiones inflacionarias

Gobierno alista otras medidas para suavizar las presiones inflacionarias

The government is preparing new measures to try to soften the inflationary pressures that affect the pockets of Colombians.

courtesy photo

At the decision of Bank of the Republic raising the interest rate by 100 basis points, up to 5%, is joined by the announcement of a series of measures being studied by the government to try to curb the inflationary spiral which has a lot of international contributions and affects the pockets of Colombians, especially families with lower incomes.

In the next few days a new decree will come out with about 36 zero tariff items that seeks to reduce costs, especially of inputs for agricultural products. Likewise, the department of agriculture announces a subsidized line of credit for $1.3 billion through the Banco Agrario that is aimed at motivating production. “There has been progress in resources so that producers in the agricultural sector have access to insurance of different types. Those are other paths that motivate the offer”, said the Minister of Finance, Joseph Manuel Restrepo at the end of the meeting of the Banco de la República, which, along with raising the interest rate, revised upwards the growth of the economy for this year from 4.3% to 4.7%. “The foregoing implies that excess production capacity will continue to be reduced at a faster rate than expected,” the Board maintains in the press release.

Restrepo indicated that with these instruments and waiting for the international behavior of prices, “inflation will tend to yield in the annualized value from the month of May.”

You may also be interested in: The Bank of the Republic continues to play hard: it raised its rates to 5%

The manager of the Bank of the Republic, Leonard VillarHe admitted that the current outlook for inflation is more uncertain than it was two months ago, “that is largely reflected in the decision we are making to increase the interest rate significantly”. This announcement leaves open the possibility for the bank’s technical team to review the inflation goals for this year.

The manager of the central bank also acknowledges that “inflationary pressures have increased”, however, he estimates that the issuer is reacting so that the increase in prices is not persistent and “we can return to the inflation target in a prudent period in the near future”.

Meanwhile, Restrepo insisted that the rise in the interest rate 100 basis points it is a significant increase and “we have to be cautious also about how this decision is going to have an impact on the economy”.

Villar said that the measure taken by the bank regarding the interest rate is of a magnitude equal to the highest that has been made in the last 20 years compared to the one taken in January of this year. “We are acting with strength, decisively, but also with great caution as circumstances recommend when decisions have to be made in an environment of high levels of uncertainty,” explained the central bank manager.

For his part, the Minister of Finance pointed out that the government is concerned with a possible increase in poverty due to the inflationary process that the world is experiencing and that is manifested in the behavior of prices in the internal market. He recalled that in this sense, the government has been acting in several directions, one of them has to do with the normalization policy that contemplates significant increases in the interest rate. Simultaneously with this, the decisions of Public politics to reduce input costs of the agricultural process through tariff reduction, but also the decisions that have been made to motivate production in the agricultural sector and thereby generate better supply conditions,” said the official.

The decision made by the Bank of the Republic it was by majority: five votes in favor of raising the rate by 100 basic points and two for 150 points.

Dismantling liquidity measures due to covid-19

The liquidity measures for the economy adopted by the Banco de la República to deal with the health crisis in 2020 began to be dismantled. The issuer says that “taking into account the current liquidity conditions of the financial markets of the country and promoting the proper functioning of the payment system”, has decided to adjust the liquidity operations scheme of Banco de la República under normal conditions as of April 4, 2022.

Again, “in the transitory expansion operations instrumented with public debt, stock brokerage companies, trust companies and investment management companies may participate exclusively on behalf of their open collective investment funds.”

The report says that the Banco de la República “will offer daily 7-calendar-day term repos with public debt securities in a cascade scheme with term repos overnight”.

He reiterated that, in a context of a return to normality in the liquidity operations of the Banco de la República, as of April 4, 2002, the auctions of temporary expansion operations instrumented with private debt securities and promissory notes, as well as those instrumented with public debt at terms of 9 months and 1 year. These mechanisms may be activated when the liquidity situation of the economy requires them.

Of interest: In February, unemployment in Colombia was 12.9%

“The Banco de la República will continue to monitor market conditions and, if it deems it necessary, will take the necessary measures to maintain the adequate flow of liquidity in the economy,” the report states. central bank.