Inflation increased due to multiple factors, namely expansionary economic policies (monetary and fiscal) during the pandemic that increased demand amid market shortages and trade restrictions, which raised transport costs, and Russia’s invasion of Ukraine, which raised energy and food prices.
What additional internal factors explain the behavior of inflation in Colombia?
Idiosyncratic factors include:
- Road blockades in 2021 that affected supply
- Strong depreciation of the peso in 2021 and 2022
- Removal of temporary reliefs for fuel prices, taxes, and fees
- Expansionary fiscal policy
- Real increases in the minimum wage above productivity growth
Related BanRep Blog: Colombian Inflation in the Global Context
After a prolonged period of price stability, global inflation rose in 2021 and 2022 to unexpectedly high levels, reaching an average of 8.7% in 2022. In advanced economies, average annual consumer inflation increased from 0.7% in 2020 to 7.3% in 2022, while in emerging and developing economies it rose from 5.3% to 9.7%...
