Colombia | Inflation hits Banrep’s target of 3% in August

August inflation recorded an annual growth of 3.02% (0.20% MoM), beating the market forecast (analysts: 0.13%; BBVAe: 0.10%). Food and regulated items continued to drive inflation and in August it increased the most in the past two years: 3.47% and 3.83% YoY, respectively. Thus, the dynamics of inflation in recent months, including the August print, has been influenced primarily by supply factors. Although core inflation in August showed a slight increase over the previous month, we recall that this indicator has slowed since June; furthermore, in August, core inflation (2.61% YoY) remains below Banrep’s inflation target. Thus, the demand pressures in 1H14 appear to be contained judging from core inflation dynamics. This leads us to believe that Banrep will hold the intervention rate at 4.5% at its next meeting as long as there are no surprises in the GDP print due on September 16th.

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