BOGOTA (Reuters) - Expectations for Colombia’s 2020 inflation levels rose versus last month as economic conditions began to normalize, although estimates remain far below the central bank’s target, a Reuters poll showed on Thursday.
According to the median of 14 analysts’ estimates, inflation in 2020 will reach 1.84%, up from the 1.7% predicted in September’s poll.
Rising inflation expectations follow normalizing consumption levels and the end of subsidy payments for public services by the government during the Andean country’s prolonged quarantine, said Juan David Ballen, chief economist for brokerage Casa de Bolsa.
“A large proportion of the drop in inflation was due to aid granted by the government, reflected by decreasing prices of regulated goods. Now that quarantine measures have been lifted, subsidies are being rolled back and prices are trending up again,” he said.
Colombia’s mandatory quarantine lasted from late March until the end of August, causing the semi-paralysis of Latin America’s fourth-largest economy and hitting domestic demand for goods and services.
In September, Colombia saw consumer prices rebound 0.32%, four-times faster than expected.
According to the median of respondents’ views, Colombia’s October inflation will be 0.16%, taking the 12-month figure to 1.96%.
Expectations for inflation for 2021 remained at 2.9%, below the central bank’s long-term target of 3%.
“We’re seeing very controlled inflation,” said BBVA’s chief economist in Colombia, Juana Tellez. “That will allow the central bank to keep interest rates at 1.75% in 2021 before beginning further monetary policy changes at the start of 2022.”
Colombia’s central bank cut 250 basis points from its benchmark interest rate between March and September to lower borrowing costs for those whose incomes collapsed in the midst of the pandemic.
Analysts believe the central bank has finished its cycle of rate cuts due to the rise in inflation and that it will leave rates unchanged at 1.75% until at least the third quarter of 2021.
Reporting by Nelson Bocanegra; Writing by Oliver Griffin; Editing by Sam Holmes
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