Macroeconomic Forecast Colombia

October 2006 | Macroeconomic Forecasts

BMI View: Inflation came in at 4.58% y-o-y in September - down slightly from 4.72% y-o-y in August, thanks mainly to a slowdown in staple food prices. Nonetheless, inflation is still hovering near to the upper band of BanRep's 4-5% target range. In our view, inflation should end the year around 4.5%, as the tightening cycle introduced in April comes into effect, and pressure on prices should start to recede. BanRep raised its benchmark interest rate to 7.00% in September. This decision means that the bank has now hiked in two consecutive monetary policy meetings and the benchmark rate is at its highest level since March 2004. Given recent inflationary pressures and higher than expected growth, we believe that another hike by year-end could well be in the offing.

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