Colombia central bank slightly raises 2024 inflation outlook to 5.5%

Colombian economy forecast: Colombia's central bank's technical team, in a quarterly report published on Friday, announced a slight upward revision of its inflation forecast for the year 2024 to 5.5 per cent, up from the previous estimate of 5.4 per cent. The adjustment comes amid ongoing economic assessments in the South American country.

While the new projection remains below Colombia's inflation rate of 7.36 per cent for the 12 months through March, it still exceeds the central bank's long-term target of 3 per cent. Looking ahead to the end of 2025, the technical team anticipates inflation of approximately 3 per cent, slightly higher than the previous estimate of 2.8 per cent.

The report underscores several upward risks for inflation, including exchange rate dynamics, potential adjustments to costs of public services and transportation, and climate conditions that could impact food prices.

On the economic growth front, the technical team also revised its forecast for 2024, now expecting growth of 1.4 per cent compared to the previous estimate of 1.1 per cent. Additionally, the team predicts a growth rate of 3.2 per cent in 2025, as announced by bank board chief Leonardo Villar earlier in the week.

The report highlights improved economic activity in the first quarter of 2024, particularly driven by robust performance in the agriculture sector, reflecting high supply levels during these months. Year-on-year growth in the first quarter is estimated to have reached 0.3 per cent.

In monetary policy decisions, the central bank's board reduced the benchmark interest rate by 50 basis points to 11.75 per cent on Tuesday. This move marks a total reduction of 150 basis points since December when the bank initiated its easing policy.

Looking ahead, analysts in a recent Reuters poll anticipate the benchmark interest rate to conclude 2024 at 8.25 per cent, with a further decline to 5.50 per cent by the end of 2025. The forecasts suggest ongoing adjustments in monetary policy to navigate Colombia's economic landscape.

(With Reuters inputs.)