07:17 AM
Inflation in Colombia broke its consecutive 13-month streak of declines in May and stood at 7.16%the same result as April, which shows signs of how the country’s macroeconomy is doing.
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“This annual inflation stopped falling because it is being seen that Food prices are on average higher than they were a year ago.”said Jackeline Piraján, chief economist at Scotiabank Colpatria.
The annual variation was led by the education sectors (11.42%), restaurants and hotels (9.76%), and the public services sector, including accommodation, water, electricity, gas and other fuels. (9.14%).
Other sectors that had a strong increase in May were transport (9.07%) and alcoholic beverages and tobacco (8.59%), which were above the national average.
This process of slowing inflation It could even be extended for another monthaccording to analysts such as Julio Romero, chief economist of economic research at Corficolombiana.
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“For June we are reviewing the forecast, but inflation will probably remain stable, that is, That pause in the disinflation process would not only be in May, but also in June”, assured the economist.
A discussion has developed around the inflationary issue about the interest rate cut by the Bank of the Republic, where the Government insists on a more aggressive cut of 75 basis points or up to 100 basis points, compared to the series of 50 points that have been applied in recent meetings of the Issuer’s Board of Directors.
The analysts consulted by the newspaper La República consider that this result, although it does not change the prospects for reducing inflation, does adjusts expectations for rate reduction at a slower pace than could have been expected by some part of the market.
“This does not modify the Issuer’s perspective of continuing its rate reduction because, among others, this data continues to be consistent with expectations of a decrease in inflation in the following months but perhaps it does. slightly modifies the probability that in the next meeting we will have a rate cut at a faster pace“said José Ignacio López, president of the Anif study center.
For the analyst, this data establishes the possibility of a cut of around 50 basis points at the next meeting on June 28.
Now, according to Romero, it is expected that interest rate cuts could be more aggressive, once the second half of the year is reached, such that rates reach a level close to 8% by the end of 2024.
According to the Citibank expectations survey, Market economists expect the rate to remain at 11.25%.
Disinflation will resume in the third quarter
A report by Economic Research from the Bank of Bogotá says that the path of moderation of inflation would resume more noticeably in the third quarter of the year, where it would drop nearly 100 basis points towards the rate of 6%.
In addition, it maintained the projection for the full year at 5.6%. According to the report, inflation met analysts’ expectations in May, for the third consecutive month, with a moderation in annual inflation, which stopped at a record of 7.16%. He added that this could be repeated in June as a result of the comparison base for these months of 2023.
