Inflation in Colombia has continued to soar, reaching 12.22 percent in the 12 months through October, according to the latest data released by the DANE statistics department this weekend.
Para octubre de 2022 la variación anual del Índice de Precios al Consumidor #IPC fue 12,22 %. La variación año corrido alcanzó el 10,86 % y la mensual fue de 0,72 %— DANE Colombia (@DANE_Colombia) November 5, 2022
This compares with 4.58 percent inflation in the same month last year, and reflects among other things the rapid devaluation of the Colombian peso, which has been one the weakest Latin American currencies this year, reaching a new low of COL 5100/USD 1 on Monday.
Monthly inflation rose 0.72 percent in October, leading to an overall 10.86 percent increase in prices since January and adding pressure to the nascent administration of President Gustavo Petro.
Food and energy costs rose faster than in other areas, as has been the case across the globe, with a 1.21-percent hike in the food and non-alcoholic drinks category and a 1.09 percent rise in transport prices.
Inflation has not been this high in Colombia since it hit 13.51 percent in March 1999. The 12-month reading also exceeded market expectations, which were forecasting 12.19 percent.
Colombia’s Central Bank has been hiking interest rates in line with inflation, upping them to 11 percent in October, a 21-year record. But President Petro believes that policy is futile, and wants to put an end to the cycle of monetary tightening in order to facilitate cheaper credit.
The country has been struggling with a big fiscal deficit for years, and has raised debt in order to cover the difference. But investors believe that debt could prove more costly to renew in the future, as underlying macroeconomic weaknesses begin to show.
The Colombian Senate passed a tax reform bill that would raise the equivalent of 1.5 percent of GDP in new taxes last week. Those funds will likely be used to expand the country’s welfare network, as well as to finance Mr. Petro’s land reform proposal, meaning that fiscal imbalances are likely to remain, even though they could help alleviate the blow of rising costs of living.