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

Inflation | Image: Unsplash

Forecasting the Colombian economyThe technical team of Colombia’s central bank announced in a quarterly report published on Friday a slight upward revision of its inflation forecast for the year 2024 to 5.5 percent, compared to the previous estimate of 5.4 percent. The adjustment comes amid ongoing economic assessments in the South American country.

While the new projection for the 12 months to March remains below Colombia’s inflation rate of 7.36 percent, it still exceeds the central bank’s long-term target of 3 percent. Looking ahead to the end of 2025, the technical team expects inflation to be around 3 percent, slightly higher than the previous estimate of 2.8 percent.

The report underlines several upside risks to inflation, including exchange rate dynamics, possible adjustments to the costs of public services and transportation, and climate conditions that could impact food prices.

On the economic growth front, the technical team also revised its forecast for 2024, now expecting growth of 1.4 percent, up from the previous estimate of 1.1 percent. Furthermore, the team predicts a growth rate of 3.2 percent in 2025, as announced earlier this week by bank director Leonardo Villar.

The report highlights the improved economic activity in the first quarter of 2024, mainly due to robust performance in the agricultural sector, reflecting the high level of supply during these months. Year-on-year growth in the first quarter is estimated at 0.3 percent.

In monetary policy decisions, the central bank board cut the benchmark interest rate by 50 basis points to 11.75 percent on Tuesday. The move represents a total cut of 150 basis points since December, when the bank started its easing policy.

Looking ahead, analysts in a recent Reuters poll expect the benchmark interest rate to reach 8.25 percent in 2024, with a further decline to 5.50 percent by the end of 2025. The forecasts suggest continued adjustments in monetary policy to navigate the economic landscape of to navigate Colombia.

(With Reuters input.)