This is up from a year-over-year rate of 3.97% last month and puts inflation outside of the central bank’s target rate of between 2%-4% for the first time since June.

This minor uptick was expected by most analysts, including those at the central bank and Bancolombia, the country’s largest bank. The central bank has forecasted inflation to end 2017 at 4.07%. Bancolombia has predicted 4.0%. But the rise is projected to be temporary, as the two institutions expect the rate to drop throughout 2018 to close next year at 3.58% and 3.50%, respectively.

The rate is also well below the 6.48% year-over-year rate in Colombia in October 2016.

Monthly price increases in recreation (up 0.31% from September), housing (up 0.22%), and healthcare were the largest factors in the overall consumer price index rise in October.

The ongoing drop in food prices, which spiked for many product categories last year, is the largest segment holding down the overall index. Food prices overall were down 0.24% compared to last month, with carrots (down 19.82%), peas (down 16.28%), and onions (down 11.82%) showing the sharpest declines. Potatoes bucked the trend with an increase of 21.15%.

The Colombian central bank, Banco de la República, has spent the year more concerned with slow economic growth than inflation. As consumer prices have come down from 2016 highs, the central bank committee has continually cut the nation’s key interest rate from a high of 7.75% late last year to the current 5.0%.

The July rate is a decrease from the 3.99% seen in June and represents the 12th straight month that inflation has fallen in Colombia since it hit a 16-year high of 8.97% in July 2016.

The July inflation rate is a decrease from the 3.99% seen in June and represents the 12th straight month that inflation has fallen in Colombia.

From June to July, the consumer price index actually fell by 0.05%. Drops in food and housing prices contributed the most to the overall reduction, and recreation prices also fell significantly.

Year-over-year core inflation, which excludes more-volatile food and energy prices, also fell below 5% for the first time since September 2015.

The year-to-date inflation rate now stands at 3.3%, well below the 5.65% registered from January through July in 2016.

The ongoing reduction comes as good news to Colombia’s central bank, the Banco de la República, which has been cutting Colombia’s key interest rate significantly throughout the year in hopes of kickstarting more economic activity.

While recognizing that low-growth is now the biggest risk to the Colombian economy, the committee of the bank has also continually expressed concerns that the inflation rate would begin to creep back up in the second half of 2017 in response to lower interest rates and moderating food prices.

But thus far inflation only continues to fall.

At its July meeting, after reducing the interest rate to 5.5%, the committee forecasted that inflation will finish 2017 at 4.28% and land at 3.52% in December 2018.

Photo credit: Jared Wade