Colombia Inflation


Inflation rises amid higher food prices

In December, consumer prices added 0.65% over the previous month, up from the 0.19% rise observed in November and more than doubling market expectations of a 0.26% increase. The main driver of the higher-than-expected monthly result was increasing food prices (December: +1.65% month-on-month; November: +0.25% mom). Food prices rose as a result of the harsh weather conditions observed in Colombia towards the end of 2010, as well as a general food price increase observed on international markets. As a result of the December increase, annual headline inflation jumped from 2.6% in November to 3.2% in December. The core inflation index, which excludes more volatile items such as fresh food and fuels, added a more moderate 0.38% in December. As a result, annual core inflation increased a notch from 3.1% in November to 3.2% in December. At its latest monetary policy meeting held on 17 December, the Central Bank left the reference interest rate unchanged at a historic low of 3.00%. This is the eighth consecutive month the policy rate has not been altered. However the recent increase in inflation may prompt monetary authorities to raise interest rates in the coming months. The current rate sits in the middle of the Central Bank's 2.0% - 4.0% inflation target range.


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