Colombia: Inflation falls to over two-year low in July
Inflation edged down to 6.9% in July, edging down from June’s 7.2%. July’s result marked the lowest inflation rate since December 2021 and surprised markets on the downside. That said, the result remained firmly above the Central Bank’s 2.0–4.0% target range. Looking at the details of the release, the slowdown largely reflected lower price pressures for transportation. Further dampening inflation were smaller increases in prices for housing and utilities plus restaurants and hotels.
Accordingly, the trend pointed down, with annual average inflation coming in at 8.6% in July (June: 9.0%). Meanwhile, core inflation fell to 6.7% in July from June’s 7.1%.
Lastly, consumer prices rose 0.20% in July over the previous month, a smaller increase than the 0.32% rise recorded in June. July’s result marked the weakest reading since October 2021.
Inflation is forecast to continue its downward trend in the coming quarters, though less quickly than in past months due to monetary easing and a fading high base of comparison; our panelists see price pressures outpacing the Central Bank’s target range until H2 2025. Over 2024 as a whole, our Consensus is inflation to slow from 2023’s level. Adverse weather denting crop yields is an upside risk.
BBVA Research’s Laura Katherine Peña Cardozo commented:
“We expect food inflation to continue to decline although uncertainty remains high due to climatic factors, such as the La Niña phenomenon. Core inflation, meanwhile, will continue to decline in the remainder of the year, helped by base effects from subclasses such as rents and fuels. Thus, we expect total inflation to continue its downward path and to close the year at 5.4%.”
Analysts at Itaú Unibanco added:
“The main risk to inflation is related to the persistence of the service prices. Although weather-related risks have been dissipating, headline inflation was revised upward due to higher indexation pressures on some services, especially in rent. As a result, headline CPI is expected to fall to 5.7% this year (+0.2pp from the previous report). However, core inflation was revised to the downside to 5.0% (5.1% previously).”