The government of Colombia’s next president, leftist Gustavo Petro, who takes power on August 7, will seek to increase subsidies for the poor, Ocampo added.
Colombia’s central bank has raised its benchmark interest rate by 575 basis points to 7.5% since the start of a bullish cycle that began in September in an effort to control inflation. Cumulative 12-month price growth hit 9.67% in June, the highest level in two decades and more than triple the bank’s 3% target.
The majority of the market expects the bank’s board to raise the rate by 150 basis points to 9% on Friday.
“As the problem is in supply, not demand, supply of high fuel prices, international food prices, fertilizers, the ability of the interest rate to reduce inflation is very weak,” Ocampo told a conference in Bogota.
Interest rate hikes only raise expectations of lower inflation thereafter, Ocampo said.
“The downside is that (the fall in inflation) comes from an economic slowdown,” he added.
Ocampo, who as finance minister will hold one of seven seats on the central bank’s board and vote on rate moves, expressed concern about further hikes.
“I don’t think we have a contractionary monetary policy yet in Colombia, although we will see tomorrow what the board of the bank determines for us, where I’m more apprehensive,” Ocampo said.
Mr Ocampo said he expected additional help for poor people affected by the price hike.
“In the short term, all you can do is increase subsidies for poor households…that’s one of the things to come,” he said.