Consumer prices in Colombia may have risen last month at their fastest clip since February due to heavy rains that pushed up food prices and transportation costs that rose on stronger demand during the holidays.
Despite the expected rise in monthly consumer prices, economists are confident full-year 2011 consumer-price inflation will end inside the central bank’s target range of 2% to 4%.
The consumer-price index for December, due out Thursday at 7 p.m. local time, likely had a 0.33% rise, up from a 0.14% rise in November, according to a median estimate from a Dow Jones Newswires survey of six economists. The lowest forecast in the survey was for a 0.22% rise while the highest was for a 0.38% increase.
If the average of the forecasts is correct, annual inflation would be at 3.64%, comfortably below the top of the central bank’s target range. Annual inflation through November stands at 3.96%, but that rate includes the much-bigger-than-expected 0.65% CPI increase for December 2010, so the risks that full-year 2011 inflation may top 4% are very slight.
Analysts at Colombia’s top brokerage InterBolsa said food prices likely were the main driver of inflation last month. They said month-on-month food prices probably shot up 0.64% in December.
“Strong rains at the beginning of the month and December food demand should exert pressures on food prices,” said the brokerage firm, which forecasts a 0.29% CPI increase for last month.
Colombia has battled with sporadic inflationary pressures this year largely due to record rainfall that wiped out highways and crops, which created a supply shock that drove up food and transportation prices. October’s CPI had a bigger-than-forecast 0.19% increase, which briefly pushed trailing 12-month inflation above the central bank’s target range, to 4.02%.
The central bank responded to the inflation concerns by raising its benchmark interest rate by 25 basis points at its November meeting, to 4.75%. The rate increase was an anomaly in Latin America, where monetary authorities have been cutting rates or leaving them on hold due to slowing growth rates related to the global financial crisis.
But Colombia’s economy has seen few effects of the global economic woes, and gross-domestic-product growth was likely near 6% in 2011. The growth rate and the central bank’s desire to demonstrate to markets that it is serious about fighting inflation convinced it to announce the November rate increase.
The bank left rates on hold in December and analysts aren’t certain which direction rates will go in this year, given the uncertainty of the global economy. Inflation for 2012 is expected to land within the central bank’s target range of 2% to 4%, albeit again in the upper realm.
