The Board of Directors of Banco de la República reiterates inflation target at 3.0% (+/- 1 percentage point)

• Complying with the provisions of Act 31 of 1992, Banco de la República reiterates that its inflation target is 3.0%.
• Inflation can deviate from the target due to transitory shocks affecting the economies. In some cases, these shocks reverse quickly. Therefore, instead of trying to keep inflation within the target range at all times, central banks define a time horizon for its achievement.
• Within the Inflation Targeting strategy followed by the Board of Directors of Banco de la República, the monetary policy has the flexibility to bring inflation to the target within a time period that depends on: the nature, magnitude, and persistence of the shocks received; the lags with which the monetary policy affects inflation; and the perception of the Board of Directors on the cost of different paces of convergence to the target, among other things.
• During the last year, the Colombian economy has been exposed to strong, transitory supply shocks which have affected consumer prices. The depreciation of the peso has impacted the prices of imported goods and production costs. Besides, there have been significant increases in food prices due to climatic reasons. As a result, inflation has temporarily deviated from the target. Given the magnitude and persistence of the effects of these shocks, convergence of inflation to the target is expected within a two-year policy time horizon.
• Facing the temporary shocks described, trying to achieve a faster convergence of the inflation target to the goal would lead to excessive changes on the reference rates and to a high cost in terms of employment and economic activity. However, a too slow response would also be costly: if medium-term inflation expectations move away from the goal, their re-alignment would require a tighter monetary policy in the future and a sharp slowdown of the economy. 
• The 3.0% inflation target is the basis of the monetary policy strategy. The decisions of the Board of Directors are aimed at achieving this target and the convergence of inflation to it is made easier if those who determine prices and wages incorporate these facts in their decisions. 

Bogotá