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Colombia Observes Slowing Inflation
According to a recent survey by Reuters, Colombia may be experiencing its 11th consecutive month of decelerating inflation. Coupled with sluggish economic growth, these factors may compel the country's central bank to implement more aggressive cuts to its primary interest rate. The study, which collected data from 20 economists, predicted a 0.94% rise in consumer prices for February, substantially below the 1.66% experienced the previous year and only slightly above the 0.92% recorded in January.
Future Interest Rate Speculations
Speculative forecasts varied between 0.75% and 1.32%. Should the median projection be accurate, the yearly inflation rate for Colombia through February would slow to 7.58%, a decrease from January's 8.35% but still considerably exceeding the central bank's 3% goal. The DANE government's statistical agency will release February's official inflation data on March 7.
Economists' Predictions for Interest Rate Cuts
Fourteen economists anticipate that February's lowered inflation will prompt the central bank to reduce its interest rate by 50 basis points to 12.25% by the end of March. On the contrary, five economists believe it will be reduced by 75 basis points to 12%. Meanwhile, one economist predicts only a 25-basis point cut, resulting in a rate of 12.50%.
Potential Factors for Future Economic Tactics
Jackeline Pirajan, an economist from Scotiabank Colpatria predicts a 75-basis point cut and states, "The sharpest inflation deceleration will arise within the year's first quarter, enabling the central bank to mull over a bolder interest rate cut in March."
Colombia's economy expanded by a meagre 0.6% in 2023, falling far short of market predictions. The central bank's technical team foresees a benchmark rate that surpasses market estimates in a bid to curb inflation against the backdrop of rising commodity prices due to the El Nino weather phenomenon.
Inflation Projections for Year’s End
Analysts in the survey projected a rise in year-end inflation to 5.47%, an increase from previous month's forecast of 5.38%. The central bank remains hopeful that inflation will reach its 3% target by the first semester of 2025 at the latest.
