What to Expect from Declining Inflationary Trend in Colombia

Inflation in Colombia in June 2017

The annual consumer inflation in Colombia (GXG) has been on a declining trend over the last year as of June 2017. Consumer prices increased at a slower pace of ~4.0% year-over-year in June of 2017 compared to a 4.4% rise in April. Most of the components of inflation rose at a slower pace, resulting in a gradual rise in inflation in June 2017.

You can see the inflationary trend in Colombia over the last year in the graph below.

What to Expect from Declining Inflationary Trend in Colombia

Inflation in June 2017

Inflation in June 2017 stood below market expectations of 4.0%. The inflation level in June was the lowest since January 2015 due to reduced costs for components such as food, housing, clothing, health, education, recreation, transportation, and communications.

Monetary policy in Colombia

The reduction in food prices over the past year resulted in an overall slowdown in consumer prices as of June 2017. Declining inflation over the last year has led to an easing monetary policy to support economic activity. The Central Bank of Columbia has lowered its inflationary expectation for 2017, mainly due to the lower variation in consumer prices along with an easing monetary policy.

The Central Bank of Colombia expects additional reductions in the interest rate in 2017. A lower interest rate is expected to help inflation meet its target rate of 3.0% and boost slower economic activity in 2017.

The recent slump in oil (USO) prices has affected the market performance of this commodity-dependent (DBC) economy in June 2017. The Global X MSCI Colombia ETF (GXG), which tracks Colombian equities, fell about 4.0% in June 2017. So far in 2017, GXG has risen about 6.0% as of July 12, 2017.

Let’s look next at Argentina.