By Nelson Bocanegra
BOGOTA (Reuters) – Expectations for Colombian inflation have risen amid persistent pressure on food prices and new concerns over the depreciation of the local peso currency, which is trading at record lows against the dollar, analysts in a Reuters poll said on Thursday.
Inflation will end the year at 3.66%, those surveyed said, up significantly from the 3.50% predicted in last month’s poll and a further move away from the central bank’s target rate of 3%.
The increase in the consumer price estimate is explained by temporary upticks in costs for food and other regulated items and the effect of a 17.2% depreciation in the peso over the last 12 months, analysts said.
“The intensity and persistence of the supply pressures indicate that inflation will end the year at 3.75%,” said David Cubides from Banco Itau.
The weaknesses of the peso, among several other factors, will take inflation down to 3.2% at the end of 2020, he added.
Consumer prices were up 3.18% last year. Analysts’ median inflation expectations for next year were up slightly to 3.33% in the survey.
Inflation will climb to 3.82% in August, the analysts added, because of the long-running closure of a highway which connects central Colombia to the country’s eastern plains, a key agricultural area.
Landslides often close major roads in the mountainous and rainy Andean nation.
Pressures on food and other prices will be temporary, Juan Jose Echavarria, the head of Colombia’s central bank, said during a quarterly inflation presentation earlier this month, and the bank’s board will at some point use policy to help lower consumer prices.
Those eventual monetary policy decisions could take the indicator down to 2.8% at the close of next year, he said.
Analysts in the poll said they anticipate the central bank will continue to hold its interest rate at 4.25%, where it has remained since April 2018, at least through the end of the year.
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