Despite the effects of inflation, the Issuer's credibility rebounds

The caution with which the Bank of the Republic has begun the cycle of lowering its interest rate, after a year of a lower rate of growth in the inflation rate, has largely to do with credibility, one of the most valuable assets a central bank hasas expressed by its general manager as its full-time members.

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This has been stated after each meeting of the board of directors of the Bank of the Republic in which they have made interest rate decisionsits general manager, Leonardo Villar, and is emphasized by other directors in other countries, as frequently done by the president of the central bank of the Federal Reserve (Fed) of the United States, Jerome Powell.

Precisely today, in the Third Commission of the Senate, Villar is summoned together with the Minister of Finance and Public Credit, Ricardo Bonilla, and the other members of the board of directors of the Banco de la República, in order to comply with presentation of the management report and it is expected that among the various topics that will be addressed, credibility will be discussed, as a fundamental asset for meeting the inflation goal, which after the pandemic and due to its effects, has not been able to be met.

In the Issuer's report to Congress, aspects are mentioned such as the projection of the gross domestic product (GDP) for this year, which in The board of directors on March 22 announced that it went from 0.8% to 1.1%as well as the estimate that it will re-enter the inflation target range of 2 to 4% towards mid-2025.

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The report mentions that credibility in monetary policy is a valuable asset for the Bank of the Republic.

This allows us to achieve the stability objectives of prices, economic growth and financial stability efficiently and at a lower cost.

It mentions that high credibility in monetary policy strengthens the confidence of economic agents in the central bank and It facilitates the planning of your future consumption and investment decisions.

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Clarifies that although credibility is not constant, “You win slowly with consistent and coherent actions; however, it can also be lost quickly. Therefore, it is crucial that central banks maintain clear and effective communication with the public, explaining their decisions and results.”

In Colombia, the credibility of the central bank has remained high, despite some episodes of high inflation. “Although the Covid-19 pandemic and its aftermath have been a challenge, credibility is recovering rapidly and would approach its historical average level by the end of the forecast horizon (2025)”the report mentions.