MNI POLICY: BanRep Likely To Keep 3% Target, Shorten Horizon
MNI (BRASILIA) - The Central Bank of Colombia’s board is leaning towards reducing the timeframe for its 3% inflation target to 12 months from 2025, MNI understands.
By law, the board must confirm or adjust the inflation target and time horizon every November. Last year, BanRep kept its 3% target but extended its timeframe by six months to 18 months.
This year, the board may return to its traditional horizon, aiming for achieve 3% by the end of 2025, as disinflation continues. Annual inflation dropped to 5.41% in October from 5.81% in September, below the consensus forecast of 5.71%. It was the fourth consecutive month of falling inflation and the lowest level since November 2021.
In November 2023, when 2024’s target was reaffirmed and the timeline extended, annual inflation stood at 10.15%. (See MNI: Latam Policymakers Concerned About US Elections at IMF)
Last month, BanRep cut its interest rate by 50 basis points to 9.75% in a four-three decision, with three members supporting a 75bp cut. The board’s headline inflation forecast for 2024 is 5.3% (5% core), with expectations of continued convergence toward the target by 2025.
"Survey-derived inflation expectations for year-end 2025 remained unchanged at 3.8%, while those implied by public debt markets stayed anchored at around 3% on average, though some indicators increased in the final weeks of October," the minutes noted.