Does it moderate in April? Analysts expect slight decline

Does it moderate in April? Analysts expect slight decline
Does it moderate in April? Analysts expect slight decline

05/06/2024

Inflation in Colombia continues to be a topic of great interest to the populationespecially in the context of the economic recovery led by the Petro Government and the consequences on family consumption.

Eyes are focused on the inflation data for April 2024, which, according to the Citibank survey, it is expected to decline slightly from 7.36% to an average of 7.14%.

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A minimum expectation of 7.01% and a maximum of 7.30% is expected. Among the highest expectations are those of Grupo Bancolombia (7.30%), Banco de Bogotá (7.25%), BTG Pactual (7.24%) and Banco Santander, Bbva and Colfondos, tying with 7.20% .

Although they expect a general downward behavior, The focus is on the regulated component.

Under this scenario, José Ignacio López, president of the Anif Center for Economic Studies, calculated that monthly inflation for April will be 0.49%, so estimated that the annual variation will be 7.06%.

“A disinflation process continues in the country, it is slow, there is still inflationary inertia in the services sector, but we continue to see a correction especially in food and goods. This would allow us to continue a process of normalization of monetary policy that will gradually have a positive impact on companies and families.”López explained.

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This inflation data will be crucial for the next meeting of the Bank of the Republic in Junewhere the board has stressed that future decisions will depend on the data.

It is worth remembering that last Tuesday, April 30, the Board of Directors of Banco de la República cut the interest rate by 50 basis points to 11.75%.

For his part, Julio Romero, chief economist of Economic Research at Corficolombiana, projected a monthly inflation of 0.57% in April, which implies a slowdown in annual inflation to 7.14%, from 7.36% in March.

He then warned that the decline in inflation in April will be the slowest of the current disinflationary process. Because? “The effects of the El Niño Phenomenon will be reflected in perishable food, electricity and water.”

He added that rents will maintain upward pressures due to the indexation process. In contrast, the group of goods would have negative monthly inflation driven by adjustments in vehicle prices, which have been incorporating weakness in consumption and the appreciation of the Colombian peso.

In this same trend, the economist and teacher Germán Machado specified that the expectation is that inflation will continue to slow down, although at a much slower pace than in the first three months of the year, because most of the base effect of 2023 has already been diluted, “so now we will see a slower decline in the numbers. Inflation will continue to moderate due to the weakness of economic activity.”

He then pointed out that, compared to the figure from a year ago, The country will have a lower CPI for services (especially rentals), regulated goods and some goods. That would compensate for the higher food CPI that would have occurred due to the El Niño phenomenon and where the greatest pressures would be that would prevent the data from falling further.

So between April and June the process of reducing the speed of inflation will go much more slowly. “This will also lead the Bank of the Republic to be more prudent in reducing interest rates, so it will not be as likely to see reductions of more than 50 basis points in the coming sessions.”

What does this mean for Colombians? If April inflation is confirmed at around 7.14%, as analysts expect, it would represent a slight advance in the moderation of consumer prices. However, the Banco de la República will continue to monitor the situation closely and make monetary policy decisions as necessary.

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