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Colombia Inflation January 2024

Colombia: Inflation drops to lowest level since February 2022 in January

Inflation fell to 8.3% in January from December’s 9.3%. January’s reading represented the weakest inflation rate since February 2022. Although inflation was down from the previous month, it remained fairly elevated. The result was largely driven by rising prices for housing and utilities, with the widespread indexation of prices in the economy adding to price pressures amid the recent hike to the minimum wage.

Annual average inflation fell to 11.3% in January (December: 11.7%). Meanwhile, core inflation fell to 8.7% in January, from December’s 9.5%.

Finally, consumer prices increased 0.91% in January over the previous month, accelerating from December’s 0.46% rise. January’s figure marked the sharpest increase in prices since March 2023.

Our panelists see inflation roughly halving this year from last, before cooling more gradually thereafter to average just above the midpoint of the Central Bank’s 2.0–4.0% target range in 2028. This will be because global commodity prices, which surged in 2022, are set to ease in the medium run. That said, inflation is poised to remain elevated in the near term. The government recently hiked the minimum wage by 12%, and the El Niño weather pattern is stoking food prices.

Analysts at Scotiabank Colpatria commented on the drivers:

“The reduction in inflation has been significant for the headline inflation, but slower in the case of services, something highlighted by Banrep in its last monetary policy meeting, emphasizing that the higher-than-expected minimum wage increase contributes to a higher price indexation, added to a high energy inflation, which in January 2024 stood at 27.09% YoY.”

On the outlook, BBVA Research’s Laura Katherine Peña Cardozo said:

“BBVA Research expects inflation to show reductions during the following months, which however will maintain important pressures associated with indexation factors. We expect inflation to close 2024 about 5.4%.”

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