Colombia's Inflation Accelerates Unexpectedly, Central Bank Pauses Rate Cuts
Colombia's inflation unexpectedly rose last month, prompting the central bank to halt its rate-cutting cycle amid concerns over renewed price pressures.
Official data released Friday revealed a 5.22% year-over-year increase in consumer prices in January, exceeding the 5.10% median estimate from Bloomberg's economists' survey. This is higher than December's 5.20% rise.
For the fourth consecutive year, Colombia has exceeded its inflation target of 3% plus or minus one percentage point in 2024.
Despite a series of interest rate cuts since 2023, the monetary policy committee unexpectedly left borrowing costs unchanged at 9.5% last week. Policymakers expressed concerns about a worsening fiscal outlook, a substantial minimum wage hike, and tariff threats from US President Donald Trump.
Central bank economists now predict a slower convergence of inflation toward the target and anticipate a 4% finish for price increases in 2025.
Board members noted that the near-10% minimum wage increase, the acceleration of producer price inflation, and the rebound in inflation expectations pose challenges.
Some economists believe that the monetary policy committee will adopt a dovish stance after President Gustavo Petro appointed Laura Moisa and Cesar Giraldo as central bank co-directors.
The central bank's next policy meeting is scheduled for the end of March.