By Peter Murphy and Nelson Bocanegra
BOGOTA Feb 14 Colombia's inflation is likely to
rise to between 2.5 and 3.0 percent in 2014, central bank
director Jose Dario Uribe said on Friday, with faster economic
growth helping lift the indicator from its lowest level since
1955 in 2013.
Inflation fell below the bank's two to four percent target
range to 1.94 percent last year despite a comparatively low
benchmark interest rate held at 3.25 percent for 10 straight
months which stoked economic activity but price increases to a
Uribe said the drop in the peso by 14 percent in the last
year versus the dollar would provide a "low" amount of
inflationary pressure due to more costly imports, while
quickening economic activity would compound price increases
"All these factors lead in the direction of inflation
approaching three percent over the course of the year, but very
probably we will end up below three percent by December," Uribe
said, presenting the bank's quarterly inflation report.
The minutes of the rate-setting meeting, held by the bank's
seven-member board of directors on Jan. 31 and published on
Friday, said members saw inflation on track to reach the 3
percent center of their target range and that the economy would
reach its potential growth level over the course of 2014.
The minutes said differences among members persisted over
how quickly these changes will take place. Perceptions of how
quickly the economy is nearing those points are likely to be key
considerations in the board's subsequent rate-setting meetings.
Bumper harvests that held down food prices last year are not
expected to be as large in 2014, likely causing faster inflation
in that segment which has a roughly one-third weighting in the
consumer price inflation index.
The bank held to its existing forecasts for 2013 growth of
between 3.7 and 4.3 percent, with four percent the most likely
figure. He reiterated the 2014 growth forecast of 3.3 and 5.3
percent with 4.3 percent most likely.
"The economy is picking up ... We've also seen a important
recovery in internal conditions, an increase in internal demand
in terms of consumption and investment," Uribe said.
The Andean nation is the world's No. 4 exporter of steam
coal for power generation, the biggest exporter of washed or
mild arabica coffee and is investing heavily to raise its
current crude oil output of around one million barrels per day.
Its economy grew 4.2 percent in 2012 and 6.6 percent
expansion in 2011, a comparatively strong rate for the region.
Despite a weakening currency, Uribe said the bank had slowed
daily dollar purchases to an average $10 million per day versus
an average of around $40 million in 2012 and 2013 to plump up
its "cushion" against potential external shocks.
The slowing of bond purchases by the United States Federal
Reserve has weakened currencies of emerging markets like
Colombia as investors pull out some investments in the
expectation recovery in developed economies will make their
financial assets comparatively more attractive.
Uribe said any sign of a slow-down in China was another
external risk for Colombia if the Asian nation's appetite for
basic goods and commodity imports slowed.