According to estimates by the Consumer Price Index and the authorities of the Central Bank, the inflation at the end of 2016 will be 0.7%, well below the announced target for this year (between 2% and 4%).
Olivier Castro, president of the Central Bank, believes that reducing the growth in prices has been a gradual process, highly influenced by measures taken in the last 15 years by the entity and, more recently, reinforced by supply shocks related to low international prices of raw materials.
Castro explained that this is a long-term goal and, therefore, it’s normal that the indicator is far from the goal during short periods.
Domestic prices are affected by external factors. Prices of raw materials and oil are low. The Central Bank can do little about that. If they were internal factors, then the Bank could do more,”
said Castro.
However, low inflation helped reduce the monetary policy rate to 1.75%, which has facilitated a reduction in interest rates in financial institutions such as banks, cooperatives and mutuals.