EL ESPECTADOR, March 7, 2024
(Translated by Eunice Gibson, CSN Volunteer Translator)
For February, the areas that have had the most effect on the Consumer Price Index in Colombia have been transportation and education.
The Consumer Price Index (IPC in Spanish) followed a trend of reduction, locating at 7.74% for its annual variation in February (as compared with the same month in 2023).
That shows a reduction of 5.5% from the figure registered in February of last year, according to information revealed by the National Administrative Department of Statistics (DANE in Spanish) this last Thursday. The last reduction had been registered in January of 2022 (6.94%).
(Graph omitted.)
“We are controlling inflation effectively; we ended February with a cumulative figure of 7.74%, which already includes the minimum wage, recent changes in gasoline prices, the price of tolls, the tax on ultraprocessed foods and sugary drinks, and also the cost of education,” stated Finance Minister Ricardo Bonilla.
Minister Bonilla also pointed out that inflation for vulnerable populations was at 6.54%. “In practice, we have increased the buying power of that population. The ones that are taking on the highest costs of inflation are the Colombians with high incomes; for them, it’s 8.36%.”
In the annual variation by categories of expenditures, the greatest variations were registered in transportation (11.97%), education (11.66%), and alcoholic beverages and tobacco (11.38%).
Annual variation of the Consumer Price Index by categories of expenditure
February 2024
Categories of Expenditure Annual Variation
Transportation 11.97%
Education 11.16%
Alcoholic beverages and tobacco 11.38%
Hotels and restaurants 11.06%
Lodging, water, gas, electricity, and other fuel 9.77%
Health 8.21%
Diverse goods and services 7.25%
Goods and services for the home 5.49%
Clothing and shoes 4.88%
Recreation and Culture 4.0 %
Food and non-alcoholic drinks 1.89%
Information and communication 0.21%
Total 7.74%
Source
DANE
According to the monthly analysis (compared with January), the variation was 1.09%. That fact is mainly explained by the education category, which increased by 8.74%, which is typical for that month.
The numbers revealed by DANE were In line with estimates by the analysts. For example, the economic analysts at the Bank of the Republic estimated that the Consumer Price Index for February (monthly) would be between .77% and 1.45%. In the Survey of Financial Opinion by the Independent Center for Economic and Social Research (Fedesarollo), the annual measurement of inflation for February was 7.73%.
The analysts consulted in the survey by the Bank of the Republic predicted that the Consumer Price Index would end the year between 5 and 6%. The Finance Ministry estimates that in December the index will be 6%.
Inflation and food
The annual variation in the cost of food was 1.89% and this category contributed .54%, while in February of 2023, the variation was 24.24% and the contribution of that category was 15.05 %.
For more than a year, food has no longer been the item that contributed the most to inflation; however, alarms sounded at the beginning of 2024 because of the El Niño phenomenon and its possible effects on the Colombian countryside.
Right now, the outlook is positive. For now, the consequences of El Niño have not been as intense as was expected. There has been “extreme heat, but at the same time, brief showers were interspersed to refresh some of the rural areas,” says Carlos Duarte, a member of the Institute for Intercultural Studies and a Professor at the Javeriana University in Cali.
The foods that went down in price the most between February of 2023 and the same month in 2024 were plantains (-33.4%), onions (-32.37), yuca (-25.68%), potatoes (-19.62%), and tree tomatoes (-19.10%).
Among those that rose in price in this category were sweets and preserves (28.53%), processed and prepared foods (23.33%), and gelatins, flans, and puddings (23.23%). In this category, the price increase for fresh fruit stands out: (12.56%).
The path of inflation in Colombia
At this point, adjusted inflation shows 10 months of continuous reduction, which marks a clear tendency toward reduction of the Consumer Price Index. Besides that, the country is turning toward a comfortable place: single digit inflation.
So, not only is that the tendency (which is already considerable) but also, at the time, the results for December (9.28%) surprised the analysts by being below their projections, as they had predicted some basic points above 9.5% ( the Fedesarrollo survey).
That news was more than welcome. But it was also good news because the better part of the reduction in the Consumer Price Index in general has been led by the reduction in the category of food.
On this point, the behavior of the Consumer Price Index has stimulated two consecutive reductions in interest rates at the Bank of the Republic. However, in the most recent meeting the debate turned on whether the reductions were too small, or, on the contrary, whether the report could have been reduced further on 25 basic points.
The evolution of interest rates since January 2020
(Chart omitted)
According to Leonardo Villar, manager of the Bank, the board’s caution in the reduction of rates in the past is, basically, to avoid running too fast at that time, and then later having to suddenly pull up a little. “The reasons why they didn’t make a larger reduction were that the majority believed there would be some risks in later having to halt the process, and that inflation was not guaranteed to arrive at the point that was anticipated,” said the manager at the time.
Minister Bonilla has said that there are 500 real points in which the interest rate could prejudice economic growth. “If we want to contribute to the recovery of the economy, it’s absolutely necessary to lower the intervention rate.”
According to the Bank, the Consumer Price Index needs to return to the established goal (3%) no later than mid-2025.