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Colombia Inflation December 2023

Colombia: Inflation falls to over one-year low in December

Inflation dropped to 9.3% in December, down from November’s 10.1% and below market expectations. December’s result marked the weakest inflation rate since May 2022. The reading was largely driven by moderating price pressures for food and non-alcoholic beverages.

Accordingly, the trend pointed down, with annual average inflation coming in at 11.7% in December (November: 12.1%). Meanwhile, core inflation fell to 9.5% in December, from November’s 9.8%.

Lastly, consumer prices increased 0.46% in December over the previous month, largely in line with November’s 0.47% increase.

Our panelists expect inflation to roughly halve in 2024 from 2023, before declining 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 decline in the medium run. That said, inflation is likely to remain elevated in the short term. The government recently hiked the minimum wage by 12%, and the El Niño weather pattern is expected to stoke food prices.

BBVA’s Laura Katherine Peña Cardozo said:

“BBVA Research estimates that at the beginning of 2024, inflation has some room to continue decreasing due to the strong base effect of 2023; however, the indexation processes, traditional at the beginning of the year, may mitigate such decrease.”

Analysts at Scotiabank Colpatria commented on the implications for monetary policy:

“We think that reaching the single-digit mark again is good news for the central bank, and it maintains a potential rate cut between 25 and 50 bps on the cards [at the Bank’s next meeting on 31 January].”

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