Dr José Darío Uribe Escobar

Governor, Banco de la Republica de Colombia

Colombia’s central bank has come a long way from the institution that couldn’t reduce the 22% inflation rate that was afflicting the country until less than 10 years ago.

The bank adopted an inflation-targeting framework in 2000, which not only led, among other factors, to lower inflation rates; it also enhanced the independence of the central bank by explicitly highlighting that the bank’s main priority is bringing down inflation. Monetary policy has also become more transparent with the publication of inflation targets, as well as regular quarterly reports.

Helped by currency appreciation, the central bank of Colombia has achieved the crucial task of meeting its inflation targets of 5% in 2004 and 2005 and it is on course to meet the more ambitious target of 4.5% for 2006.

For the long term, Dr Jose Dario Uribe Escobar, Colombia’s central governor, has even more ambitious plans. Relying on the bank’s stronger monetary policy, he wants to bring inflation down to 2%-4%, with a central target of 3%.

“The Colombian monetary policy in 2006 has been clearly successful,” says Mr Uribe. “The inflation target will be met with remarkable precision, as inflation will be near 4.5% by the end of the year, just in the middle of the target range. This achievement has been possible in the context of an economy that is growing close to 6%, well above its historical average.

“Credibility on inflation targets has significantly increased to about 91%, a level without precedent. Greater transparency as well as an effective communication strategy have enhanced market understanding of the monetary policy strategy, hence contributing to its effectiveness and success.

“In 2007, new challenges arise. The most important is to keep inflation on a decreasing path towards its long-term target [3%]. Transparency, accountability and education of markets must be deepened.

“With success on these fronts, we aim at influencing public behaviour in a way that supports policy decisions and enhances the credibility and independence of the central bank.”

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