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Economy

Inflation targeting only route: Central Bank president

by Adriaan Alsema September 1, 2009

Colombia news - Jose Dario Uribe

Inflation targeting seems to be the only possible route for Colombia’s
central bank, the president of the institution said Tuesday in a debate
at the Argentine central bank.

“I can’t see an alternative to inflation targeting,” Jose Dario Uribe told a monetary policy conference.

He was responding to Argentine economist Mario Blejer, who’d
suggested central banks have adopted so many new mechanisms as a result
of the global financial crisis that they’ve weakened
inflation-targeting regimes. These have become so flexible they no
longer meet the definition as originally conceived, he said.

“There’s a conflict between flexibility and credibility,” Blejer said.

Uribe acknowledged that the Colombian central bank had been
flexible, even before the crisis, adopting capital controls to halt a
domestic credit boom.

Moreover, Colombia also has struggled sometimes to meet its exact
inflation-targeting goals, but he said this was more often a result of
external shocks than domestic demand.

Overall, inflation in Colombia has fallen from 31% before the
inflation-targeting regime was adopted, to levels around 3.2% today,
Uribe said.

The Colombian official said it would be “pragmatic” to adopt other tools to help macroeconomic and financial management.

But even in terms of improving financial system stability, Uribe
said, having low and stable inflation is the best way to help it
develop. (Dow Jones)

Central Bankeconomyinflation

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