Macroeconomic Forecast Colombia

July 2008 | Macroeconomic Forecasts

BMI View: The rapid acceleration of price growth in Q208 will not have gone unnoticed by the Colombian authorities. Headline prices rose for a third consecutive month to 7.2% y-o-y in June, the fastest pace in almost five years. Worryingly, it has now been 18 months since inflation broke above the bank's CPI comfort zone of 3.5-4.5%. Moreover, once food prices are taken out of the equation, inflation still rose by 5.2% y-o-y in June (from 5.0% the previous month). From our standpoint, it is now a question of 'when not 'if' BanRep resume its monetary tightening cycle. We have pencilled in one more 25bps hike this year, which would take the policy rate into double digits, but cannot discount further moves should inflation numbers continue to disappoint.

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