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Consumer prices edge upward but
Central Bank keeps rate steady
In November, consumer prices increased 0.78%. The November figure brought
the annual inflation rate to 7.1%, which was up from 6.4% observed in
October. The November prices hike can be attributed to higher increases in
food and transportation prices. Food prices were under pressure due to
unfavourable climatic conditions, which diminished agricultural harvests.
The higher transportation prices, in turn, were attributed to rising
gasoline prices. The November inflation figure now puts inflation well
above the Central Bank target of 6% for this year. Nevertheless,
participants anticipate price increases to remain subdued in December. As
a result, the year-end annual inflation rate is expected to come in at
6.3%, which is unchanged from last month. Panellists expect monetary
officials to contain inflation next year, with the annual rate declining
to 5.8%, which is within the target range of 5% to 6% set by the Central
Bank in November.
Central Bank maintains monetary
policy
Despite rising inflation, monetary officials have maintained the main
monetary policy settings, as economic activity remains moderate and the
recent currency strengthening appears likely to offset a more pronounced
pass through to domestic prices of the recent peso weakening. In November,
the benchmark DTF interest rate remained virtually unchanged at 7.9%.
Participants appear to expect the Central Bank to hike in December amid
the less favourable inflationary setting, as the DTF rate is anticipated
to rise to 9.4% by year-end. A rebound in economic activity next year is
likely to prompt the Central Bank to tighten monetary reins. Consensus
participants expect interest rates to increase next year with the DTF rate
rising to 10.0%.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Colombia. For more details please click here.
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