Although the greatest impact of high inflation is felt more severely by the lower strata, in most cases this population is also the first to feel the effects of its fall. Why?
(According to Petro, the slowdown in inflation began.)
This behavior is due to the fact that, most of the time, the ruble that has the greatest impact on the cost of living is food.which becomes even more expensive for strata 1, 2 and 3.
That is precisely the scenario that Colombia is experiencing today, after the Dane announced the results of the Consumer Price Index (CPI) for February 2023, which in its monthly variation reached 1.66%, while the annual variation was 13.28%. The data showed a moderation in the rise in food prices, which leads one to think that inflation would have peaked and the following month would begin to drop at a general level.
“The inflation ceiling has been reached in January and the slowdown has begun. It is highly important that food is no longer what marks inflation. A further decrease in the price increase is possible for the coming month”, President Gustavo Petro wrote on his Twitter account, after the CPI figures were known.
(Price speculation?: This is what Petro said about food costs).
In the same line is the Minister of Finance, José Antonio Ocampo, who also assured that inflation has already reached its ceiling in Colombia.
“I am pleased that the country’s inflation has peaked and, in particular, that the annual rate of inflation for low-income households and agricultural products has been reduced. In March we will begin to see a lower rate of increase in prices”, assured the Minister of Finance on his Twitter account.
In addition, the Producer Price Index also showed a reduction in its variation, which would ratify this movement, which would mainly benefit low-income citizens, who are also the most affected by high inflation.
Andrés Langebaek, executive director of economic studies of Grupo Bolívar-Davivienda considers that he believes in the affirmation of the Minister and President, “because inflation rose marginally, and food inflation dropped significantly, from 26.18% to 24.14%. The probability that total inflation will drop in March is quite high”.
(Annual variation of inflation reached 13.28% in February).
However, there is still upward pressure on some perishable foods due to the exchange rate and the weather, but less than what was seen last year.
“It seems that the ceiling is already being reached, especially since food is slowing down significantly, although there is still pressure on some perishables due to the exchange rate and the weather, but less than what was seen last year, with the effect of the Russian-Ukrainian war.” said Sergio Olarte, chief economist at Scotiabank Colpatria.
The expert assured that, despite this, inflation will continue to be around 13% or 12.5% throughout the first half of the year, and that it will continue to fall further towards a range of 9% towards the end of the year.
However, despite the fall in food prices, the uncertainty does not end as there could be other pressures that would make the ceiling not yet be reached. and that still that impact is transferred to people in strata 1, 2 and 3.
According to Langebeak, there is already a reduction in prices in the agricultural sector, and in manufacturing inputs, but it will be much more difficult to lower inflation in services, such as rents. “It will be almost impossible to lower tuition in colleges and universities and also in transportation, with the price of gasoline that is lagging behind some increases that were due a long time ago”explained the expert.
