May 6, 2016 / 8:57 PM / 2 years ago

Colombia CPI expected to slow by end-2017, then speed up again

BOGOTA, May 6 (Reuters) - Colombian inflation is expected to come down to within the central bank’s 2 to 4 percent target range by the end of next year, but it may spike beyond that again in 2018, the bank’s chief said on Friday.

In a graph shown during Jose Dario Uribe’s quarterly economic presentation, inflation dropped starting in the second half of this year and then rose again in the first quarter of 2018 to above 4 percent.

Consumer prices in April were 7.93 percent higher than a year earlier, almost double the upper limit of the bank’s long-term target range.

Inflation should ease back this year toward 6 percent as a nationwide drought eases and food prices begin to decline, Uribe said.

“The graph shows that in the next year there will be a drop to levels slightly below 4 percent and then shows that at the end of 2017 or beginning of 2018 the trend again moves slightly higher.”

Still, Uribe said it was hard to predict so far down the line.

“We have to take into account that levels of uncertainty increase the longer the projection. So we shouldn’t give it too much importance,” he said.

The bank has raised its key interest rate 250 basis points over the last eight months, to 7 percent. At the last policy meeting, the bank surprised the market by lifting the rate 50 basis points instead of the 25 expected.

Policymakers have been criticized during the current tightening cycle for not acting sooner to get a grip on prices, leading inflation expectations to become un-anchored from he target range. (Reporting by Nelson Bocanegra; Editing by James Dalgleish)

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