Colombia’s consumer-price index likely accelerated in December compared to the same month a year earlier as devastating rains have crippled farmlands and are spawning higher food and transportation costs.
The consumer price index is expected to rise 0.3% in December, according to the median estimate from a Dow Jones Newswires survey of five economists. If accurate, the increase would mark the largest inflation figure since April of this year.
“The weather and transportations conditions have not yet improved,” said Daniel Velandia, an analyst with local brokerage firm Correval SA, in a research note. Velandia expects that food prices rose 0.4% in December because of the torrential rains that have damaged nearly 5% of Colombia’s farmland.
Food shortages are unlikely to take place, which has eased pressure on food prices, Velandia said. Food prices represent a key component of the CPI index, accounting for 28% of the inflation basket.
The December inflation results will likely leave price increases for 2010 anchored at the bottom of the central bank’s target of 2% to 4% for the year. Inflation for the last 12 months through November stood at 2.59%.
The central bank said at its monetary policy meeting on Dec. 17, the last of this year, that the higher-than-average rains are pushing up food prices, adding the inflationary effects would only be temporary. The central bank expects inflation for next year to also come in at the lower end of its 2% to 4% target range.
Most economists, however, expect price increases to accelerate next year. A central bank survey of 44 analysts published Dec. 10 shows that, on average, economists expect inflation for 2011 to come in at 3.19%.
The low inflation reading of the last few months, mainly the result of slow increases in food prices, have allowed the central bank to keep its benchmark interest rate on hold for eight straight months at a record low of 3%.
The central bank has kept its key rate unchanged in a bid to ignite economic growth after Colombia’s GDP expanded a tepid 0.8% in 2009. The economy is growing at faster clip this year, but disappointed analysts and government officials by posting a lower-than-expected 3.6% expansion in the third-quarter this year. The GDP growth figures prompted some analysts to forecast that the central bank will try to postpone any rate hikes until the second-half of 2011.
Colombia’s national statistics institute, known as DANE, is scheduled to publish the inflation figure for December on Jan. 4. (Darcy Crowe / Dow Jones Newswires)