Box 1: Instantaneous infation in Colombia - Monetary Policy Report - January 2025
The Monetary Policy Report presents the Bank's technical staff's analysis of the economy and the inflationary situation and its medium and long-term outlook. Based on it, it makes a recommendation to the Board of Directors on the monetary policy stance. This report is published on the second business day following the Board of Directors' meetings in January, April, July, and October.
Annual infation is computed using the consumer price index (CPI), the twelve months included in this calculation are weighted equally. Consequently, price variations during the period analyzed may lead to an underestimation or overestimation of the signifcance of the information included in the most recent infation concerning infationary dynamics. Nevertheless, the measure of instantaneous infation for Colombia provides an alternative to correct this bias, calculated by assigning greater weight to the most recent data and reducing the infuence of more remote data through a Kernel function. This potential bias resulting from the overweighting of older data exists because information from more distant months may be less relevant for understanding the current behavior of consumer prices. In addition, we explore below the possibility of instantaneous infation presiding over offcial annual infation.
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