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Colombia’s central bank must raise rates in first half to control inflation -IMF -Breaking

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© Reuters. FILEPHOTO: This is the Colombia’s central banking logo, as seen in Bogota on October 1, 2018. REUTERS/Luisa Gonzalez

BOGOTA (Reuters). The International Monetary Fund said that Colombia’s central banks will be required to initiate interest rate rises during the first half year of the year. This is to control inflation and retain its long-standing credibility.

Last year’s economic growth in Andean countries was 10.6%, exceeding expectations. The entertainment, retail and manufacturing sector sectors soared.

However, the supply-chain problems and pressures in Colombia mean the central bank of Colombia will have to move quickly during the first half year in order to stabilize inflation expectations and protect against any upside inflation risks. Hamid Faruqee is the head of IMF’s Colombia mission.

Faruqee stated that controlling inflation poses a problem to Colombia’s central banks, something we also see in the United States.

The inflation rate in Colombia reached 5.62% for 2021. It was the highest inflation level for five years. In January, however, it was 6.94%. This is more than twice what the central bank had set at 3%.

Faruqee said that Colombia is in dire need of additional interest rate increases, which will be frontloaded in the first quarter of the year. Also, markets are seeing similar expectations shift in this direction in relation to other central banks.

Faruqee stated that the IMF has projected Colombia’s economic growth to be 4.5% for this year, with assistance expected to come from consumption as well as investment. However, after receiving DANE’s report Faruqee noted that the multilateral institution will revise their outlook.

He said, “Until we reexamine the forecast, we won’t be able to know the final numbers.” We’ll adjust as we examine the DANE releases today.

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