Colombia Inflation Rate Slows in January

Colombia ended January with an annual inflation rate of 8.35%, a significant drop that placed the CPI at its lowest level in two years. Likewise, the figure represents a decrease of almost one point with respect to the figure for December, which was 9.28%. The consolidation of the decline that began in the second quarter of last year means that the figure for January 2024 will be five points lower than that of January 2023.

A key factor contributing to the recent dip in inflation has been the stabilization of food prices, offering much-needed relief to household budgets. Conversely, the sectors that drove inflation in January include those typically prone to price increases at this time of year: transportation, restaurants and hotels, alcoholic beverages, and healthcare.

Downward trend consolidates

Colombia’s Consumer Price Index (CPI) saw a notable decline in January, building on the positive figures from December and surpassing economists’ expectations. Leonardo Trujillo, Deputy Director of the National Administrative Department of Statistics (DANE), highlighted that the country has reached inflation levels not seen since February 2022. Furthermore, a comparison of January figures alone reveals the best performance since 2016.

The country’s president, Gustavo Petro, in addition to celebrating the data, has made reference to the increase in the minimum wage for this year, decreed by his government and questioned by opposition and business sectors which, he said, represents a significant real wage increase for many workers.

“The inflation rate has dropped sharply again. It is at 8.35% per year. We raised the minimum wage by 12%, so if we manage to maintain the decrease in the inflation rate, Colombian workers will have a new increase in their standard of living in real terms equal to or higher than last year,” the president wrote in his social networks.

Downturn and interest rate

This trend marks ten straight months of decline, with the most notable drops occurring in the last two months. Ricardo Bonilla, the Finance Minister, highlighted this trend, particularly pointing out that January typically sees inflationary pressures due to annual increases in transportation fares, tolls, and wages at the start of each year.

“Here are already included the prices that have to be increased in January, the adjustment of salaries, the adjustment of tolls, the last adjustment of gasoline to 600 pesos, the adjustment of all products that have some connection with the price index, and that reflects that the Colombian economy is consolidating towards the reduction of inflation,” stressed the minister.

Once again, the good inflationary numbers served for the head of the Treasury to repeat the call to accelerate the lowering of the still high interest rates of the central bank. Bonilla, together with businessmen and unions from all over the country, has been clamoring for months to the banking authorities for a significant reduction in rates, which, although they are falling, are doing so very cautiously.

“We call the attention of the board of Banco de la República to the fact that there are all the necessary elements to be able to continue reducing the intervention rate. Specifically, the inflation of poor households continues to be the lowest, it has a consolidated 7.15. This means that poor households are recovering their purchasing power to a greater extent”, repeated the Minister of Finance for the umpteenth time.