Colombian Rates Pressured by Inflation

Colombian consumer price inflation was a higher-than-expected 0.49% month-on-month in December, driven by food. Inflation last year exceeded the 4.5% upper limit of the target band, which may pressure rates, according to Goldman Sachs. “If the economy fails to decelerate convincingly from a still-strong, above-trend pace and/or credit and money growth reaccelerates the central bank might have no option but to hike rates again in late 1Q2008 or during 2Q2008 in order to protect the 2008 inflation target,” says the shop. “Missing the inflation target two years in a row would significantly erode the credibility of the central bank,” it adds.