This week closes with the consolidated inflation data for 2024 which, according to Dane accounts, finally stood at 5.2% in its annual variation, a data expected by economists and which, although it marks the disinflationary rhythm that this indicator showed throughout last year, still projects risks into the future.
In a first review, the Bancolombia Investigations team highlights that this result was higher than the consensus expectation of analysts, who expected a figure close to 0.4% monthly, and slightly lower than their expectation of 0.5%; maintaining services as the segment that contributes the most to the total record.
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“Although indexation continues to be the main challenge to achieve a faster convergence towards the Issuer’s inflation objective of 3%, the truth is that the December record suggests that there will be moderate upward pressures on some regulated goods and services also on account. of the greatest devaluation,” they explained.
On the other hand, they pointed out that food inflation continued its trend bullish as a result of an acceleration in perishables and processed foods, since in the reported period a monthly inflation of 0.52% was observed in food, consistent with an annual advance that went from 2.3% to 3.27% between November and December.
Inflation.
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“This record was slightly lower than what is historically observed this month (0.69%), thanks to the dynamics of the group of perishables. Although those processed showed progress below usual for December, their acceleration added to the aggregate,” says this team of economists.
In other elements reviewed, the Dane data showed that annual inflation of goods remained stable, leaving behind the slowdown trend of the last sixteen months.
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“The result was explained by the increase in the prices of beer and clothing (0.65%), vehicles (0.23%), gold and silver items (2.01%), cleaning products (0.13%) and men’s clothing (0.22%). The regulated ones completed twelve months of deceleration in annual inflation,” they said in Bancolombia.
Here it should also be noted that those regulated completed 12 months of slowdown in annual inflation and the annual inflation metric fell from 7.6% to 7.31% in December, the lowest level since the end of 2021. However, monthly inflation was 0.72% , notably above the historical average for the month (0.39%), due to the advance in electricity rates, which grew 2.54% monthly.
Inflation.
Mauricio Moreno / EL TIEMPO
The challenge of stagnation
Although the inflation balance for December and the general balance for all of 2024 was celebrated by the majority of experts, given that the first goal of the monetary authorities was met, to keep the cost of living down, the market remains unchanged. warning voices that ask to maintain efforts to overcome stagnation.
First of all, María Claudia Lacouture, president of the Colombian American Chamber, AmCham Colombia, says that the drop in the cost of living, even more so in areas such as food, is a good thing for the country, since it improves the purchasing power of households and contributes to the growth of the economy going forward.
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“However, it is essential to sustain this trajectory in 2025, considering factors such as the possible devaluation of the peso, climatic phenomena, the price of fuel and the increase in the minimum wage, which could exert inflationary pressure. The year must be accompanied by clear messages and actions that generate confidence, boost investment and reactivate the economy,” said Lacouture.
In addition to stagnation, experts agree that the possible increases or slowing down of the fall could be due to factors such as a modest effect of the La Niña phenomenon starting in 2025, the high indexation, the devaluation, the adjustment of the minimum wage higher than year-end inflation and the impacts that the geopolitical situation international has on the supply chain.
Due to this, they highlight that it will be key to monitor the evolution of inflation in the rental category, as well as the indirect impact of the ACPM price adjustment in December and the increase in the minimum wage.
Interest rate.
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Issuer Attention
Arolina Monzón, research manager at Banco Itaú, added that there is no doubt that the disinflationary process stalled in December and that because of this, her preliminary estimate for the January CPI, which will be published on February 7, is between 0.9% and 1.0%, which would mean that annual inflation would once again remain at a high 5.2%.
“The advance of the disinflationary process will be limited by a higher than expected increase in the minimum wage (+9.54% nominal, +4.34% real), which will increase price indexation pressures, giving rise to a bias up from our forecast of 3.7% for the end of the year,” said the analyst.
With all of the above, Monzón specified that “greater indexing pressures, together with more restrictive global financial conditions, they could lead the Central Bank Board to maintain a prudent stance at the next Board meeting on January 31, with a small cut of 25 basis points, or even a pause.
Finally, we must not forget that the Board of the Banco de la República has been explicit about the upward risks faced by the inflationary convergence process, which supported the moderation in the pace of cuts at the December meeting and due to this it does not It is crazy to think that from now on the path of inflation and the materialization of the effects of the aforementioned upward risks will be carefully reviewed.
However, with the current outlook for the economy, strong rebounds in the short and medium term are ruled out and it is expected that the rate of decline will gradually resume.to reach the Issuer’s target range at the end of this year or beginning of 2026.
