Market expects annual inflation in June in the country to drop to 12.21%

Inflation began to drop in April, and everything seems to show that the indicator will continue to fall. ANDl Dane will deliver the inflation data for June, and the expectation of the market and analysts is that the Consumer Price Index (CPI) continues to register a downward trend.

(See: The possibility of a new rise in interest rates was left open).

For June, according to the latest Survey of Expectations of the Bank of the Republicin which 42 analysts including banks, stock brokerage firms, corporations, universities and other study centers participated, prices in June would have increased around 0.37%, with a range between -0.10% and 0, 59%

Under this scenario, the annual variation of inflation would have been located on average at 12.21%, according to the survey carried out by Fedesarrollo andn its Financial Opinion Survey (EOF) for last month, with a minimum projection of 12.13% and a maximum of 12.38%.

Above this average is the projection of Banco de Bogotá, since the entity estimates that the rise in prices in June was 0.43%, with which, in annual terms, inflation would drop to 12.28%.

“The most recent information, which has to do with food prices through Sipsa (food price information system) and the Producer Price Index that was released last week, point to a downward bias.” around 10 basis points, so we think there may be some surprises on the downside.”, explained Camilo Pérez, manager of economic research at Banco de Bogotá.

However, the economist recognized that there will also be upward pressure on the gasoline side, thanks to the increases that the Government has been making official every month and also for the rents.

“Given their high weight in the basket, the impact of these is notorious, and since the rents are indexed, they present variations that are attached to that inflation of more than 13% last year”, indicated Perez.

On the other hand, in Itaú the expectation for the monthly variation is 0.46%, and it is expected that the figure will drop from 12.36% in May to 12.31%.

“In the monthly data, this would only be a few basic points lower than that of a year ago (0.51%), so we would continue to see an inflation note that would remain at the top”indicated Carolina Monzón, manager of Economic Research for Itaú Colombia.

(See: Why the Fed will continue to raise interest rates, according to minutes).

For this occasion, Monzón highlighted, like Pérez, that the upward pressures would come from the side of housing and public services, as well as from transportation, influenced by increases in gasoline prices.

“We could also see some additional adjustments in the prices of road transport tickets, given the holidays of the sixth month of the year,” Monzon indicated.

In the case of BBVA Research, and as highlighted by Laura Peña, the bank’s economist, food inflation is expected to continue to decline, “but moderating with respect to the reductions of the previous month, even with a negative monthly variation.”
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However, The economist points out that in core inflation (without food) upward pressures will remain “due to a base effect in the clothing and footwear division, which in June 2022 showed negative variations due to the day without VAT”.

and also recognizes the effect from the transportation division due to increases in gasoline. BBVA expects monthly inflation of 0.54% and annual inflation of 12.39% for June.

As well as in recent months it was food, one of the items with the greatest weight in the basket of Colombians, those that marked inflation, these are also contributing to its moderation.

According to Perez, in food inflation is what has been regulating prices downwards and could also help some imported goods to fallthanks to the more favorable behavior of the exchange rate recently.

In the case of food, Monzón highlighted “the correction that has been taking place in the prices of meats, fruits and vegetables”, and assured that inflation in this item could present a fall of 0.7%, following the trend of recent months.

From the direction of Economic, Sector and Market Research of Bancolombia, on the other hand, the monthly expectation (0.48%) is higher than the market consensus, precisely, according to the bank, because their price monitor makes them estimate a higher level of food for the month.

(See: Should the ECB raise interest rates more in the euro zone?).

Although the expectation is that inflation will continue to fall, experts also consider that a series of risks persist in the outlook. “Increases in gasoline prices are being carried out, and the presence of the El Niño Phenomenon has already been confirmed internationally.Monzon said.

From Bancolombia, on the other hand, it is highlighted that in June “they would have
given new adjustments in rental rates that would be reaching historical maximums of the last two decades”.

The bank it also mentions the indexed component of electricity, gas and aqueduct rates, in addition to the increases in fuels.

(See: Reasons why the current price of the dollar favors the economy).

LAURA LUCIA BECERRA ELEJALDE
Journalist Portfolio