Colombia: Inflation inches down but remains above target in May
Latest reading: Inflation edged down to 5.1% in May from April’s 5.2%, matching market expectations but remaining above the Central Bank’s 2.0–4.0% target—where it has stood since July 2021. The drop was driven by a softer rise in housing and hospitality costs, which outweighed a faster increase in food prices. Meanwhile, transport prices were largely unchanged in May.
As a result, the trend pointed down mildly, with annual average inflation coming in at 5.6% in May (April: 5.8%).
Lastly, consumer prices increased 0.32% from the previous month in May, decelerating from the 0.66% rise logged in April.
Outlook: Our panelists expect another downtick in inflation in June and see price pressures easing further in H2 as food prices decline. As a result, our Consensus is for average inflation to fall to a four-year low in 2025 as a whole. Still, price growth should remain above the pre-Covid decade average and is seen outpacing the upper bound of the 2.0–4.0% target band of the Central Bank (Banrep) through early Q1 2026. Interest rate cuts, a minimum wage hike plus currency weakness will pose key tailwinds. A growing hydrocarbons supply shortfall is an upside risk, while export earnings, tax reforms and global tariff policy are key factors to monitor.
Panelist insight: Analysts at Scotiabank Colpatria commented on the implications for monetary policy:
“May inflation reflected that most of the indexation effects were transmitted in the first four months of the year, which can be seen as positive for the upcoming Banrep meeting. Inflation has driven the Central Bank’s decisions, and we hope that with the May surprise, the board of directors will continue the easing cycle at its June 27 meeting. Our scenario is a 25 bp cut to 9%, a level that remains contractionary enough to support inflation falling to the 3% target. However, the fiscal scenario remains a headwind and is consolidating as the main risk to imported inflation, in a scenario with higher risk premiums on local assets.”