Inflation in Colombia Fell to 7.74% in February

Inflation continues to fall in Colombia. In February 2024, the annual CPI stood at 7.74%, down 0.61 percentage points from the 8.35% reported in January. A year ago, the CPI was in the middle of the upward curve, reaching 13.28%.

As explained by DANE’s director, Piedad Urdinola, the behavior of annual inflation was explained by the annual variation in the prices of accommodation, water, electricity, gas, fuels and transportation.

Eleven months of decline

Although the most optimistic forecasts expected an even greater drop, the February figure is not bad, considering the situation in the country only a year ago. Moreover, February’s result consolidates a decline that has now lasted eleven months. In this case, the moderation in the decline can be explained by the upward pressure from sectors such as education and transportation.

For the month of February, the largest price decreases were reported in the transportation of passengers and luggage by air (-19.81 percent), tires and rims for vehicles (-4.88 percent) and new or used private vehicles (-1.61 percent).

Waiting for lower interest rates

The good inflationary performance leads us to expect Colombia’s central bank to continue lowering interest rates, a cycle that began cautiously in December and continued in January. The strong pressure on credit is undermining the country’s economic possibilities, which closed 2023 with pyrrhic growth.

Both the government and various economic and trade sectors have repeatedly called for the issuing bank to be more courageous in its policy to obtain sharper declines. However, IMF reports recently called for “prudence” from the central bank in its interest rate reduction policy.

Colombia currently has an interest rate of 12.75%, which is too high for businesses and consumers in general to have easy access to credit. At the next meeting, the central bank is expected to consolidate the rate cuts that continue to put strong pressure on the country’s economy and growth.

In fact, both the FED in the US and the European Central Bank in the European Union are showing great prudence in their monetary policies, and for now are keeping rates stable at 5.25% for the dollar and 4.5% for the euro.