The high inflation that has been seen during 2022 -and which in November reached 12.53 percent annually- has strongly affected the finances of Colombians, who have had to allocate more resources to cover their expenses due to the price increase of goods and services in the country.
However, the general manager of Banco de la República, Leonardo Villar, -according to projections from the Issuer’s economic team- envisions a more positive outlook for next year, since inflation would start to dropmainly, by three elements.
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As long as inflation does not start to drop, it will be impossible to lower interest rates.
The first of these are food prices, which in November registered an increase of 27.08 percent, according to what Dane revealed. The manager estimates that in 2023 costs will start to slow down or, eventually, be partially reversed to the extent that the current supply difficulties are eased with the help of the public policies that the Government has implemented.
The second factor that will contribute to lowering inflation will be the revaluation of the Colombian peso once morest the US dollarbecause currently the exchange rate is 40 percent above what it was two years ago (3,426.97 pesos) and 22 percent above the price it was a year ago (3,936.41 pesos).
Leonardo Villar also highlighted that in recent days the exchange rate has been corrected, since following reaching a record of 5,022.03 pesos on November 18, for this weekend and until next Monday a representative rate of market (TRM) of 4.802,48 pesos. “These kinds of pressures are not expected to continue into the future, on the contrary, there might be some trend in the opposite direction that would help bring inflation down,” she added.
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Finally, the fact that the central bank has raised the interest rate to 12 percent to mitigate the pressures of excess demand is going to help them to decrease significantly since reduce inflation to bring it to the 3 percent targetnot in the short term, but in a period of two years, according to estimates by the entity.
In addition, the manager stated that, in order for the increase in the minimum wage by 2023 to become a real increase in the purchasing power of workers, it will be essential to comply with a path of reduction in inflation so that it reaches next year 7 percent.
Meanwhile, the Minister of Finance and Public Credit, José Antonio Ocampo, assured that in order to think regarding a drop in interest rates from the Banco de la República it is “absolutely essential” that inflation begins to decline. “As long as inflation doesn’t start to come down it will be impossible to lower interest rates,” she said.
