Colombia: Inflation falls to lowest level in nearly three years in October
Latest reading: Inflation fell to 5.4% in October from September’s 5.8%. October’s result represented the weakest inflation rate since November 2021 and slightly undershot market expectations. That said, it remained firmly above the Central Bank’s 2.0–4.0% target range. Looking at the details of the release, the slowdown reflected softer price pressures for food and non-alcoholic beverages, housing and utilities plus restaurants and hotels.
Accordingly, annual average inflation fell to 7.3% in October (September: 7.8%). Meanwhile, core inflation ticked down to 6.0% in October from September’s 6.1%.
Lastly, consumer prices swung into a 0.13% decline from the previous month in October, following September’s 0.24% increase.
Outlook: Our panel expects inflation to continue to ease in the coming quarters and to average around the upper bound of the Central Bank’s target by Q4 2025. That said, the disinflation process will lose momentum owing to monetary policy easing and a fading high base effect. Drought denting energy output, a growing hydrocarbons supply shortfall and a stronger than expected La Niña weather event pose upside risks.
Panelist insight: BBVA’s Laura Katherine Peña commented:
“In aggregate, BBVA Research expects inflation to remain on a downward path in 2024. Although food inflation will increase during the last two months of the year, it will close slightly above 3%, a moderate level. Meanwhile, non-food inflation will remain on a downward path, helped by base effects and lower demand for services. Despite this, it will maintain a moderate pace of decline due to the persistence of rental inflation and risks of upward pressures from climatic factors, exchange rate pressures and adjustments in some administered prices.”
Analysts at Scotiabank Colpatria said:
“October’s result confirms that the inflation in Colombia continues to decrease consistently; however, as October’s disinflation was mostly concentrated on food and regulated prices, it is important to monitor how those dynamics evolve as the climatic events could reverse part of price reduction. […] We expect a 50-bps cut in December to 9.25%, and a potential acceleration could start in March when inflation could consolidate closer to the target range ceiling and when we expect to have more clarity about fiscal and international risks.”