What Jumps Out: In Colombia, All Eyes on Inflation Data

Following Banco de la República’s decision — or lack thereof — last week, all eyes will be on the November inflation data that will be released on Thursday from the National Administrative Department of Statistics (DANE).

In October, the monthly reading was 0.25%, which led to a year-over-year number of 10.48%. Now, the question is how far it will fall this month — and what the fallout will be. The October 2022 monthly headline was 0.77% so there is scope, all things being equal, for a healthy decline. But the focus will be on the impact of the latest gasoline price increase at the beginning of November and energy prices within the housing segment. El Niño may not have hit hard yet, but on the coast the air conditioning is running hard.

Based on this, the central bank is expected to cut rates by 25 basis points in a few week’s time to 13%. Most of the private sector (including ANDI, FENALCO Asobancaria), as well as the government, will be hoping for a low CPI number — which might leave room for a 50 basis point cut.

Given the poor decision making recently by the committee, there is little hope of this. But, at the very, very least, the markets need the signal that the easing cycle has begun.

Also watching on carefully will be the Minimum Salary Commission, which need to come up with a number for next year’s increase by December 15. November inflation will be the last component to be factored in during the negotiations — and employers will be hoping for a benign number.

On Friday, the productivity data for 2023 was released and this will also be discussed by the commission. That number was -0.7% year-over-year, which is perhaps not a surprise. An OECD report a few months ago stated that, while Colombians are the earliest risers across the 38 countries included, they are least productive. Some, in fact quite a lot, of this is due to the lack of technology. But the commission will be more concentrated on that -0.7% figure.

COP28 UAE took up press time here in Colombia. President Gustavo Petro grabbed headlines as he reiterated once again his opposition to new oil exploration licenses in his push for a greener economy. No doubt, some of this was audience-driven, but locals will jump on it. Also sat in Dubai was former President Iván Duque pushing a green agenda — odd considering that, during his four years in office, an average of 177,000 hectares of Amazon forest was lost. Fortunately that number is now falling fast.

In other news, October exports are due out this week (not much optimism in the air), and the health reform debate will finish in Congress over the next day or so. But there is still the Senate to go. It’s pitifully slow and reflecting once again the inefficiency of the corridors of power here in Colombia.

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