Colombia’s central bank raises 2024 inflation outlook to 5.5%

BOGOTA: The Colombian central bank’s technical team has slightly raised inflation expectations for this year from 5.4% to 5.5%, according to a quarterly report published on Friday.

The forecast is below the South American country’s inflation rate of 7.36% for the 12 months to March, but remains above the central bank’s long-term target of 3%.

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By the end of 2025, the technical team – whose calculations influence the bank’s board decisions when voting on monetary policy decisions – expects inflation to be around 3%, slightly above the previous estimate of 2.8%.

Upside risks to inflation remain, the report said, including the behavior of the exchange rate, adjustments to the costs of public services and transportation, and climate conditions that could also impact food prices.

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The tech team has raised its economic growth forecast for 2024 to 1.4%, up from a previous estimate of 1.1% and expected growth of 3.2% in 2025, bank CEO Leonardo Villar announced on Tuesday.

“By the first quarter of 2024, the economy will have improved compared to what was observed at the end of 2023, driven by higher activity levels in the agricultural sector reflecting the high supply recorded in these months,” the report said.

According to the report, growth in the first quarter will have reached 0.3% on an annual basis.

The central bank board cut the key interest rate by 50 basis points to 11.75% on Tuesday, bringing the total cut since December – when policy began to ease – to 150 basis points.

According to a recent Reuters poll, analysts expect the benchmark interest rate to reach 8.25% by the end of 2024 and fall to 5.50% by the end of 2025.