BOGOTÁ: Colombia’s inflation may be slightly above the 2 percent to 4 percent long-term target range in 2016, central bank chief Jose Dario Uribe said on Friday, due to higher food prices and a currency depreciation.
A figure above 4 percent would mark the second consecutive year the Andean country would overshoot its consumer price growth target since Uribe said that 2015 inflation could be above the current 12-month figure of 5.89 percent.
“For the coming year we will not rule out inflation of 4 percent,” Uribe said. “The most probable projection of the technical team is above 4 percent, but in the margin of uncertainty it’s possible it could be below 4 percent.”
“Right now we’re at 5.89 percent and it would not be strange to finish with a number a bit higher than that,” the policymaker said during a quarterly presentation on the economy, referring to the 12-month inflation figure registered in October.
Consumer prices rose 0.68 percent last month, above what was predicted by the bank’s technical team, Uribe said.
Inflation has been stoked by the El Nino drought, which has led to higher food prices, and by a 37 percent depreciation in the country’s peso currency. “We have an inflation well above what we expected; in that we have been surprised,” Uribe said.
“But later we expect a strong fall because inflation is originating from temporary factors that have increased food prices and other prices associated with devaluation,” he said.
In a bid to counter inflation pressures, the bank board surprised the market last week by raising the benchmark interest rate 50 basis points to 5.25 percent. The country’s economy will expand between 1.5 percent and 4 percent next year, Uribe said.
The wide growth prediction comes as Colombia confronts a global decline in prices for crude, the country’s top export and source of national income. The bank predicts economic expansion of between 2.4 percent and 3.4 percent this year, with 3 percent as the most likely. Third-quarter growth for this year may be better than previously thought, Uribe said.
