Prices turn out to rise without touching a ceiling, and the inflation in colombia it is exceeding the expectations of both the market and the Government, which therefore raises the forecasts for 2023.

Proof of this was that the variation in the consumer price index (CPI) with which 2022 closed exceeded all estimates, and stood at 13.12%, the highest figure in 23 years.

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The Ministry of Finance, for example, has already made its estimates for 2023 with less data, since in the presentation of the Financial Plan for this, which it delivered in the last days of December, it was estimated that the data with which it was going to close inflation was of 12.2%, that is, almost one percentage point below the real data.

In turn, the latest monthly survey of expectations of the Bank of the Republic projected a closing of the year at 12.64%, while the Financial Opinion Survey (EOF) of Fedesarrollo estimated a figure of 12.66%.

Hence, several of the main market players have described the indicator as a ‘surprise’, which in turn would lead to new revisions in the inflation forecasts for 2023, which are around 8%.

“The upward surprise of inflation in December is a real bucket of cold water for analysts, economic agents and the authorities. Faced with this reality, the inflationary peak would arrive later than what we and most of the analysts previously specified”, required Juan Pablo Espinosa, from the direction of Economic, Sectoral and Market Research at Bancolombia.

For this reason, this entity considers that annual inflation would begin a slow moderation process only until the second quarter, and that for this reason, the Board of Directors of the Banco de la República will have no other option than to continue increasing its reference rate.

Inflation in Colombia is exceeding the expectations of both the market and the Government.


Mauricio Moreno/El Tiempo

Inflation remains a risk in 2023

bancolombia consider that inflation is the biggest risk for 2023, and that it will remain above 13% in the first quarter.

At Banco Itaú, for example, the inflation figure with which 2022 closed and 2023 began was also seen as an upward surprise. The entity allowed that, despite the fact that a slowdown in domestic demand was expected, it is most likely that the fall will fall slowly and that the year will end above the forecast of 8% that it maintains.

“With inflation still at highs, inflation expectations still rising and large twin deficits in the offing, we expect the central bank to continue raising rates this month from the current 12% to at least 50 basis points,” Itaú.

Laura Peña, BBVA Research economist for ColombiaFor his part, he assured that in December the surprise came mainly from food, an item that reached an annual variation of 27.8%.

“We foresee that the high levels of inflation continue to be transmitted, especially during the first half of 2023, followed by a moderation of the data that can close the year at close to 8%,” he said.

A similar perspective is held by Banco de Bogotá. The financial entity maintained that the Bank of the Republic could promote a new increase in the interest rate in January, of 100 basic points or 1.0 percentage points, which would reach 13%.

«Depending on the evolution of inflation, subsequent additional adjustments could be necessary, even despite the evidence of slowdown that is already taking place in the economy,» the entity said.

From international banks, the situation in Colombia also draws attention. JP Morgan highlighted that the peak in inflation would occur in February, with an estimate of 13.35%. Despite this, the North American bank does not allow it to «continue to see some eventual relief in 2023, coming from the lower prices of food and energy that are coming.»

JP Morgan maintains its 2023 inflation forecast at 7%, somewhat lower than local players, but highlights that on average it will remain around 10.75% and will remain in double digits until August.

Far from target range

Another element worth noting is that inflation is well above the target of 3% of the Bank of the Republicand that at this point, it is more than four times higher.

In addition, according to the projections of the different experts, this would be the third year in which the indicator remains outside the range between 2% and 4% that the Issuer has defined, and although a more marked correction is expected in 2024, it would continue to be for above this roof.

Although the manager of the Banco de la República, Leonardo Villar, has spoken that the end of the rate hike cycle is near, most analysts expect a new rise in January, to 13%.

Journalist Portfolio