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Colombia Inflation October 2023

Colombia: Inflation declines to lowest level since July 2022 in October

Inflation fell to 10.5% in October, following September’s 11.0%. October’s result represented the weakest inflation rate since July 2022 and was slightly below market expectations. The moderation was broad-based, with lower price pressures recorded for housing and utilities, food and non-alcoholic beverages, and restaurants and hotels.

Annual average inflation edged down to 12.3% in October (September: 12.4%). Meanwhile, core inflation fell to 9.9% in October, from September’s 10.3%.

Lastly, consumer prices rose 0.25% over the previous month in October, which was below the 0.53% rise seen in September. October’s result marked the weakest reading since October 2021.

Our panelists expect inflation to dip below double digits before the end of the year, before declining more substantially next year on past interest rate hikes and a tougher base effect. However, even at the end of next year, inflation is set to remain above the Central Bank’s 3.0–5.0% inflation target; price pressures will be stoked by hikes to government-set gasoline prices, widespread indexation within the economy, and a new tax on sugary drinks and highly-processed foods.

Analysts at Scotiabank Colpatria said:

“Gasoline price increases […which were paused in October] resumed in November and are expected to extend until January; after that, diesel price moves will be in the spotlight, given their potential second-round effects. According to a Banrep study, if diesel prices increase by 10%, the full indirect impact on inflation is 0.25 percentage points, which looks low; it probably does not account for potential social disruption and protests that an increase in those prices could trigger.”

Analysts at Credicorp Capital commented on the monetary policy implications:

“Consistent with the [Central Bank’s] projections, the decline in core inflation remains much slower than in other regional economies, supporting the cautious stance adopted by the majority of the BanRep’s board and its staff.”

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