Inflation in September reached a new peak. The monthly data of the consumer price index (CPI) registered a variation of 0.93%, once again driven especially by food, and the annual figure rose to 11.44%, as reported by the National Administrative Department of Statistics (Dane). This is the highest figure in 23 years, from the 13.51% registered by the CPI in March 1999.
(Annual inflation in Colombia stood at 11.44% in September).
And after knowing this result, President Gustavo Petro questioned through his Twitter account the effectiveness that the monetary policy measures taken by the Banco de la República to contain inflation.
“The rise in the internal interest rate, which was opposed by the finance minister, but had the support of the entire board of directors of Banco de la República, will only transfer the world recession to the Colombian economy”, he said, and added: “the real intention of raising internal interest, contrary to our proposal, has to do with avoiding capital outflows due to the rise in the US interest rate. It could be avoided with a transitory tax on remittances to swallow capitals”.
He also trilled that the rise in the interest rate goes against economic growth and employment, and that the government will deepen its anti-inflationary policy cwith measures such as taxation, a fertilizer subsidy, agrarian reform, food in poor neighborhoods and the change in the energy rate formula, added to the strengthening of public banks to achieve lower rates.
“The presidents have always expressed their opinion, and there have been antecedents of presidents on the subject, former president Duque this same year also made some statements in this regard, but institutionally the Bank has its independence, its criteria”said Andrés Langebaek, director of economic studies at Grupo Bolívar-Davivienda.
The price of food continues to drive the inflationary rhythm of Colombia; this time less because of international inflation, more because of the floods. Energy services lessen your impact.
Is it useful to raise the interest rate to contain inflation?: No. https://t.co/qGioPcvjR8
– Gustavo Petro (@petrogustavo) October 5, 2022
Langebaek mentioned that the Issuer has the Minister of Finance on the board, something “which is also very particular to the Colombian model and it is a mechanism by which the Bank is sensitive to what the Government thinks anyway,” he said.
The economist reiterated that the rise in interest rates is not a phenomenon exclusive to Colombiabut global, and that even in the particular case of the country, as elsewhere, the rise in rates has been lower than inflation.
“We can still say that the policy is expansionist, not contractionary, where what is not wanted is that a supply shock be added to an overload in terms of excessive demand.”, he explained.
The director of the center economic studies Anif, Mauricio Santamaría, he said for his part: “Luckily the Banco de la República is acting responsibly. If it weren’t for these rises in interest rates, inflation would skyrocket even more, demand would continue to grow and therefore the external deficit would continue to grow and, then, for sure, we would enter a recession”.
In addition, the former Minister of Finance, Mauricio Cárdenas, also referred to the president’s statements, and said that, although there is a sentence of the Constitutional Court which says that the Board “should look not only at inflation but also at growth and employment. It does not say that one objective prevails over the others”.
(Inflation in Colombia: energy prices rose again).
Cárdenas also said that “the jurisdiction to set taxes on swallowed capital belongs to the Board of the Bank of the Republic. I wouldn’t because it would be suicide. The stampede of capital would generate more devaluation and more inflation”, and clarified that the Board does not have the power to adopt taxes, but what it does is make capital inflows or outflows more expensive with exchange measures, such as mandatory deposits.
Last week the Issuer’s board raised its intervention rate to 10%, motivated by the fact that inflation expectations have maintained their upward trend.
The Issuer also argued that the pace of economic activity so far this year has exceeded the forecasts of the technical team and the market, forl strengthening of domestic demand, marked mainly by the high growth of household consumption, and that another factor that influenced the decision is the increases in external interest rates.
(Unstoppable food: the sector that has risen the most in prices in 2022).
Despite efforts from monetary policy, inflation continues gallopingto the point that the variation of 0.93% in September was 16.4 times greater thanThe average of the last five years (-0.10%). In this month, the most important variations occurred in goods and services for the home (1.65%), where cleaning products are found; food (1.61%) and clothing and footwear (1.33%).
In the case of the annual data, the category with the greatest increase is food (26.62%) and is responsible for 4.53 percentage points of inflation. Public services, restaurants and hotels and the transport sector also stand out for their weight in inflation. So far this year (January-September), inflation is already at 10.08%.
Laura Lucia Becerra Elejalde