Colombia July inflation forecast ever closer to double digits: Reuters poll

FILE PHOTO: A man buys vegetables and fruits in Cali

By Nelson Bocanegra

BOGOTA (Reuters) – Colombia’s inflation is forecast to have maintained its upward trajectory in July, rising almost to 10% amid supply issues and robust demand, pushing up estimates for this year and next, a Reuters poll revealed on Friday.

Consumer prices are projected to have risen 0.60%, according to the median taken from the responses of 13 analysts.

If the analysts are correct, annual inflation to the end of July will hit 9.98%, above the 9.67% registered as of the end of June and maintaining the highest levels in more than 22 years.

“We’re revising our inflation forecast even higher, amid a combination of a short-term resurgence in fresh food prices related to persistence of the La Nina weather phenomenon and, more importantly, incorporating the shift of recent pressure on the Colombian peso,” Ben Ramsey, director of economic research for Latin America at JPMorgan, said in a research note.

Colombia’s government DANE statistics agency will publish inflation data on the morning of Aug. 5.

Persistent inflation – which is more than three times the central bank’s target of 3% – is the main reason behind the monetary policy authority’s decision to hike its benchmark interest rate by 575 basis points in an upward cycle starting last September to a current 7.50%.

The majority of analysts expect the bank to raise the rate by 150 basis points to 9% on Friday.

On Thursday, Colombia’s incoming finance minister, Jose Antonio Ocampo, said interest rate hikes have a limited capacity to rein in accelerating inflation and raised concerns of how high rates would affect economic growth.

Meanwhile, inflation expectations for the fourth largest economy in Latin America for the end of this year increased to 9.20%, from 8.95% in the June survey.

Forecasts now see inflation hitting 9.20% in 2022, up from a projected 8.95% in the same survey in June.

At the same time, analysts also expect inflation in 2023 of 5%, up from expectations of 4.72% last month.

(Reporting by Nelson Bocanegra; Writing by Oliver Griffin, Editing by William Maclean)