Colombia’s Inflation
Rate May Rise to 11-Month High on Drought
By Alexander Cuadros
(Bloomberg) - Colombia’s consumer prices
probably rose at the fastest pace in 11
months in January as a drought caused by the
El Niño weather effect reduced crop
production, pushing up food prices.
Prices probably rose 0.61 percent last month
from December as annual inflation quickened
to 2.04 percent, according to the median
estimate of economists surveyed by
Bloomberg. The national statistics agency
will report inflation at 7 p.m. New York
time.
While dry weather will boost food prices in
the first half of 2010, “very sluggish”
growth will keep annual inflation from
rebounding to its late 2008 peak, said Neil
Shearing of Capital Economics Ltd. The
prospects of tame consumer prices will give
policy makers leeway to hold interest rates
at a record low until the third quarter, he
said.
“The real uncertainty at the moment is food
prices,” said Shearing, a senior
emerging-markets economist at the London-
based research company. “But even if El Nino
led to a spike, there’s no way the central
bank will raise rates because that’s not
going to stop El Niño.”
The central bank last year slashed borrowing
costs eight times to 3.5 percent to spur
consumer demand and credit after the $242
billion economy went into recession.
Finance Minister Oscar Ivan Zuluaga last
month said the economy probably expanded 0.2
percent to 0.3 percent in 2009 and he
expects growth this year of 2.5 percent.
IDEAglobal emerging-markets analyst Alvise
Marino sees no “imminent change in the
bank’s monetary outlook” as food-price gains
are outweighed by “weak economic conditions
in Venezuela and the need to cut fiscal
spending in order to close the deficit gap,”
according to a research note e-mailed Jan.
29.
Wholesale food prices rose 2.15 percent in
January from a month earlier, compared to a
0.27 percent increase in January 2009,
according to a Feb. 1 statement on the
Agriculture Ministry’s Web site. Central
bank chief Jose Dario Uribe has said the
jump in food costs will be temporary.
SABMiller Plc’s Colombia unit, Bavaria SA,
said last month it will increase beer prices
after the government announced plans to more
than quadruple the sales tax on the
beverage. The Mining and Energy Ministry
this month raised gasoline prices.
“February is likely to be the month with the
biggest upside potential in prices as tax
hikes, fuel price hikes and food prices
converge,” analysts Pedro Tuesta and David
Duarte of 4Cast Inc. in New York wrote in a
research note yesterday.
Consumer prices may rise 3.8 percent this
year after gaining 2 percent in 2009, the
lowest annual pace in a half- century,
according to a central bank survey of
economists last month.
The annual rate has declined from the 7.9
percent reached in October 2008. The central
bank set a 2010 inflation target of 2
percent to 4 percent.
The yield on the country’s 11 percent
benchmark bonds due in July 2020 yesterday
rose 11 basis points, or 0.11 percentage
point, to 9.03 percent, according to
Colombia’s stock exchange. The peso fell 1.1
percent to 1,989.65 per dollar. |
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