As is well known, domestic financial systems amplify and propagate external shocks to emerging markets economies, rather than helping smooth their effects. The build up of internal and external imbalances and the subsequent recession and financial crisis of the nineties in Colombia attest to the perils of a pro-cyclical behaviour of the financial system.
•  The Bank expects inflation to return to the 2 per cent target in two years or so, as the effects of retail competition dissipate and excess capacity is absorbed.