- Increase was led by food staples as El Nino hits farmers
- Central bank repeatedly stated that price shocks are temporary
Colombia’s annual inflation rate accelerated to its fastest pace in more than six years as dry weather causes food prices to rocket while the slump in the peso triggers higher import costs.
Consumer prices rose 5.35 percent in September from a year earlier, exceeding all 29 forecasts in a Bloomberg survey, whose median estimate was 5 percent. The increase was led by staples such as beans, cereals and fruit as the “El Nino” weather phenomenon hits crop supplies.
The central bank raised the nation’s policy rate a quarter percentage point to 4.75 percent last month, the first increase in more than a year, saying that this was needed to curb inflation expectations. Inflation has remained above the upper limit of the bank’s target range for the last eight months.
Colombia targets annual consumer price rises of 3 percent, plus or minus one percentage point. Policy makers have repeatedly insisted that the increase in food prices and the “pass through” of the weaker peso onto consumer prices are one-time effects that will dissipate of their own accord.
The peso has depreciated 32 percent over the last 12 months, the biggest drop among major emerging market currencies after the Russian ruble and the Brazilian real.