JPMorgan now sees a higher inflation peak for Colombia

RIO DE JANEIRO, BRAZIL – As part of a new economic analysis, JPMorgan released its latest outlook for inflation behavior in Colombia.

The new forecasts released by the firm were informed after the technical team of the Central Bank (Banco de la República) announced that its inflation forecast for 2022 is again outside the issuer’s target range.

With this as a basis, JPMorgan revised its inflation outlook against the backdrop that food prices continued to rise.

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The new forecast then explains that the inflationary peak in February would reach 7% annually (from 6.7% previously).

The document warns that, on the horizon, “the Monetary Policy Report and the minutes of the (January 28th Board) meeting will help define upside risks”.

OTHER PERSPECTIVES FOR ANALYSIS

Among the variables JPMorgan is looking at to see a reduction in inflation is natural gas, which accounts for 1% of the CPI basket: if the price cut is fully passed through, “it would shave about seven basis points off headline CPI in January.”

“These types of price cuts tend to be reflected in consumer prices gradually over several months (as resellers have to change the price they charge consumers in the end),” adds the analysis.

The firm’s hopeful outlook, while warning that the above will help cushion the January CPI blow, becomes a critical view if one takes into account that food prices, adding fuels, will already experience indexation effects in services and an expected rebound in basic goods (after the year-end VAT-free days).

“The Bank of the Republic has moved into a more aggressive mode with its decision to accelerate the pace of increase from 50 basis points to 100 basis points at last Friday’s meeting, a decision driven first and foremost by deteriorating inflation expectations,” the document concludes.

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