Colombia: Inflation soars to over five-year high in February
Consumer prices rose 1.63% over the previous month in February, decelerating from January’s 1.66% increase. Looking at the details of the release, prices for food and non-alcoholic beverages, transport, as well as for restaurants and hotels all rose at more moderate paces in February.
Inflation climbed to 8.0% in February, which was up from January’s 6.9%, moving further above the Central Bank’s 2.0%–4.0% target range. February’s figure represented the highest inflation rate since August 2016. Consequently, the trend pointed up, with annual average inflation coming in at 4.5% in February (January: 3.9%). Lastly, core inflation jumped to 6.5% in February, from January’s 5.6%.
Commenting on the implications these results will have on BanRep and its future policy moves, Daniel Velandia and Camilo Durán, analysts at Credicorp Capital, explained:
“Under this context, the BanRep will continue to rapidly adjust the monetary policy in the coming months, with the aim of reaching a contractionary stance this year in order to anchor inflation expectations that drifting away from the target range […]. Additionally, while the current set up of significantly high export prices for Colombia (oil and coal) will allow for an improvement of the external profile, we think that the current account deficit will remain high this year […] standing as an additional factor for a significant monetary adjustment. […] Uncertainty will remain significantly high for monetary policy, as the sharp acceleration of global energy prices and the possibility of sticky food inflation at very high levels have increased the probability of a recession for the world economy in the coming quarters.”