Colombia’s Inflation Rate Expected to Slow Down in February

Summary

Consumer prices in Colombia are expected to rise by 0.94% in February, significantly lower than the 1.66% of the previous year.

Estimates for February range between 0.75% and 1.32%.

If the expectations are met, the 12-month inflation in Colombia through February will slow down to 7.58%.

The central bank of Colombia might consider a substantial cut in interest rates in March due to the expected decrease in inflation.

Median of responses from Analysts

20 analysts have provided their median estimates which suggest the consumer prices would increase by 0.94% in February, a figure considerably less than the 1.66% increase observed the year before and slightly above 0.92% documented in January.

Varying Estimates

The estimates provided by these analysts have a range, going from a low of 0.75% to a high of 1.32%.

Twelve-Month Inflation Forecast

Following these estimations, if the median estimate proves to be correct, Colombia’s inflation over 12 months up to February could slow to about 7.58%, a figure noticeably below January’s 8.35% but still considerably above the central bank’s 3% target.

Prediction for DANE’s February Inflation Data

The government’s DANE statistics agency is expected to release the inflation data for February on March 7.

Anticipated Central Bank Actions

14 analysts forecast that the declining inflation in February would result in the central bank implementing a cut in its interest rate by 50 basis points, bringing it to 12.25%, by the end of March, whereas 5 analysts believe it would result in a greater cut of 75 basis points, hence reducing it to 12%. Furthermore, one analyst has predicted a 25 basis-point reduction, which would decrease the rate to 12.50%

Inflation Deceleration and Interest Rate Cut

February will demonstrate a significant deceleration in inflation, which will be most noticeable in the first quarter of the year,” says Jackeline Pirajan, an economist at Scotiabank Colpatria. She added, “This would enable the central bank to contemplate a larger interest rate cut in March,” she predicts a reduction of 75 basis points.

Economic Growth

Colombia’s economic growth was a mere 0.6% in 2023, falling significantly short of market predictions.

Benchmark Rate Expectation

The technical team of the central bank expects that the benchmark interest rate will remain high, contrary to market estimates, as a strategy to control inflation in the midst of increasing price risks linked to the El Nino weather phenomenon.

Inflation Forecast for Year End

The analysts’ predictions for inflation by year-end have increased to 5.47%, demonstrating a slight growth from the previous survey’s 5.38%.

Central Bank’s Inflation Target

The central bank predicts that inflation rates will converge on the target of 3% by the first half of 2025 at the latest.

Source: https://tradingeconomics.com/colombia/inflation-cpi

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