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BBVA On Inflation & BanRep Policy

COLOMBIA
  • BBVA expect that, given the year-end data, inflation will continue to be pressured upwards at the beginning of the year with elements such as the increase in the minimum wage, the rise in fuel prices, the end of the tax exemption for hotels and restaurants and with consumption that, although falling, does so slower and later than initially expected.
  • Thus, during the first part of 2023 price transmissions may continue to consolidate, particularly in services and some goods, while food inflation could be alleviated by base effects and a more favourable climate.
  • For the second half of the year, however, moderating demand is expected to allow price pressures to ease and facilitate a faster decline in the path.
  • The surprise of the December figure may echo in the expectations of economic agents, while at the same time putting greater pressure on the Central Bank, which must evaluate how to apply increases in the policy rate in order to achieve an adjustment in inflation that does not stifle the economy.
  • Thus, the result increases the probability that the Bank will have to raise the overnight rate by more than 50 bps, BBVA’s forecast before the December inflation figure was released.
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