Colombia: Inflation remains at an over three-year low in December
Latest reading: Inflation was stable at November’s 5.2% in December, marking the joint-weakest inflation rate since October 2021 and broadly matching market expectations. Nonetheless, it remained entrenched above the Central Bank’s 2.0–4.0% target. Looking at the details of the release, softer increases in housing and utilities costs offset faster price pressures for food and transportation.
Accordingly, the trend pointed down, with annual average inflation falling to 6.6% in December (November: 6.9%). Meanwhile, core inflation edged down to 5.8% in December from the previous month’s 5.9%.
Lastly, consumer prices increased 0.46% over the previous month in December, up from November’s 0.27% print. December’s figure was the highest reading since April.
Outlook: Inflation should continue to ease in the coming quarters on a high base effect and falling global food and energy prices; our panel expects price pressures to hover around the upper bound of the Central Bank’s target range in H2 2025. That said, risks are tilted to the upside and include a premature monetary policy loosening, a weaker currency, a growing hydrocarbons supply shortfall and a stronger-than-expected La Niña weather event.
Panelist insight: BBVA Research’s Laura Peña Cardozo commented:
“BBVA Research expects inflation to continue to moderate in 2025, although some latent risks may slow the pace. The December 2024 result suggests a slightly higher starting point for inflation in 2025, which will add to other pressures, such as indexation factors, to generate an inflation path this year that will remain downward […] to close near the upper end of the Bank of the Republic’s target range.”
Analysts at Scotiabank Colpatria said:
“On December 24, the government decreed the minimum wage increase for 2025 at 9.54%, higher than the 6.2% estimated by the Ministry of Finance and 434 basis points above the final inflation for 2024, which implies a still significant indexation effect that would prevent the inflation from reaching the target range in 2025. […] The chances of the monetary policy rate in Colombia remaining at 9.50% in the January meeting increased with today’s data, becoming our base case scenario.”