the financial company J. P. Morgan published an analysis of the relationship between accelerated rise of inflation, that is being seen during this 2022, and the prices of items such as food and electricity.
(Read: Inflation and rates, the main challenges that the IMF sees in the region).
According to the analysis carried out, inflation in Colombia, which ended at 5.6% at the end of 2021, would accelerate in January to 6.5% and reach a peak of around 7% in February.
This would be related “to the beginning of the effects of indexation in the figure from the rise of 10% in the minimum salary of Colombians,” he explained.
(Read: Banco de la República revised downwards its GDP projection for 2022).
THERE ARE NO SIGNS THAT FOOD PRICES WILL FALL
JP Morgan assured that, as has been seen since the beginning of 2022, food prices will continue to rise, mainly due to the high cost in fresh and basic subbranches, such as dairy, meat and grains, and the devaluation of the Colombian peso.
This will lead to a significant rise in the CPI in the first months of the year.
According to the study, the first trimester will be crucial to determine the behavior of the indicator throughout the year.
Commodities represent three quarters of the food basket and their prices tend to be less volatile.
(Read: The employment outlook in Colombia in 2021, according to salary range).
“It is expected, then, that inflation in December 2022 is 4.5% and the forecast for 2023 is not encouraging, since this indicator would also reach a higher value than expected, about 4%,” the firm estimated.
ENERGY PRICES ARE ALSO RISING
JP Morgan assured that, since the beginning of 2022, “we have seen that both the prices of the electricity like those of fuel They increased by about 2%.
Despite this, adjustments in domestic fuel prices continue to be prudentcompared to the increase in world oil prices, which are up 25%.
For this reason, the analysis estimates that fuel prices will rise by at least 10%, but this will depend on the political landscape to take place throughout the year for the elections.
(Read: The economic uncertainty brought by the elections in the country).
It should be noted that the Government and Ecopetrol announced a 30% drop in the sale price of natural gas to resellers beginning in January. This began to benefit around 25% of the population.
THE ROLE OF BANK OF THE REPUBLIC
The analysis indicates that the Banco de la República has moved in a more aggressive. What was reflected in his decision to increase in 100 basis points the monetary policy intervention rate.
This decision was driven, above all, by the deterioration of inflation expectations.
Building of the Bank of the Republic.
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The study concludes that the Bank will remain in ‘hawk’ mode, rather, “will not hesitate to implement measures to avoid risks in the face of a dismal forecast“.
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