As Inflation Soars, Stiglitz Ally Brings Jobs Focus to Colombia

Andrea Jaramillo and Ezra Fieser
·2 min read
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(Bloomberg) -- Jose Antonio Ocampo, Colombia’s finance minister, has the perfect credentials to carry out the economic vision espoused by the country’s radical new leftist president: a Yale-trained PhD economist who’s been penning works on social development for decades, often in collaboration with Nobel laureate Joseph Stiglitz.

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To Ocampo, orthodox economic models that prioritize controlling inflation over boosting growth and employment are flawed, too near-sighted and harsh. Central bankers, he argues, should actively coordinate policy with other branches of the government, including the Finance Ministry.

So when Ocampo was asked during an interview in New York on Friday why Colombian law calls for him as finance minister to sit on the central bank board and votes on interest-rate decisions -- an oddity in global central banking -- he quickly became animated. That arrangement was written into the country’s constitution, he said before launching into an explanation of how the charter of the U.S. Federal Reserve requires its board members to focus on unemployment as well as inflation.

“I know very well the law of the US,” Ocampo said. “First of all, maximum employment. So it’s maximum employment the first objective of the Fed, and the second is inflation and the third is moderate long term interest rates.”

Ever since Ocampo’s boss, Gustavo Petro, was elected president in June, Colombian investors have been concerned that the government would try to pressure the central bank into reversing course and cutting interest rates sooner than appropriate. So despite his calls for policy coordination, Ocampo was quick to emphasize that the Petro administration will not run roughshod over the central bank.

“It’s independent,” he said, “but at the same time, there’s a commitment to coordinate.”

It’s a tough moment to be focusing on growth over inflation. In Colombia, like most everywhere else in the world, consumer prices have skyrocketed over the past two years. Colombia’s inflation today stands at 10.8%, the highest annual rate in a quarter-century. Ocampo expressed optimism that it has now peaked and said he expects to see a “moderate” decline in the rate.

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