Colombia suffers economic hit from return of El Niño

Inflation in Colombia would have decreased in July due to a generalized favorable behavior of prices except for fuels, although expectations for the end of the year rose due to the possible impact of El Nio weather phenomenon, a Reuters poll showed. 

“Consumer prices would have registered a rise of 0.32% in July, lower than the 0.81% in the same month last year, although marginally above the 0.30% that marked June,” according to the poll. 

The projections fluctuated in a range between 0.16% and 0.50%. 

If the median of the poll is met, annual inflation would stand at 11.58% at the end of July, lower than the 12.13% it accumulated until June and its lowest level since September last year. 

“The effects of a high comparison base would allow that, despite slight monthly advances in the food CPI, the downward trend in annual inflation of this component continues,” said a Bancolombia report. 

“In the category of goods, this month would have prolonged the slowdown trend,” Bancolombia added. 

The state-run National Department of Statistics (DANE) will release its July inflation report on Aug. 8. 

The expected behavior of inflation would play in favor of meeting the expectations that the Central Bank will begin to reduce its reference interest rate between September and October, after two months of stability in the indicator, which remains at 13.25%. 

Meanwhile, inflation expectations for Latin America’s fourth-largest economy at the end of this year rose to 9 percent from 8.88% in last month’s survey, three times the central bank’s target of 3%. 

The forecasts are in line with those of the central bank’s technical staff, which on Wednesday revised down its forecast for this year to 9% from a previous estimate of 9.5%.