Colombian is facing severe inflationary pressure as the U.S.-Israel war against Iran disrupts global shipping, driving up prices for many commodities.
The war has caused unprecedented disruption to shipping through the Strait of Hormuz, a vital waterway for global trade and energy supplies.
Rising commodity prices are fueling inflation. Colombia's central bank announced at the end of March to raise the interest rates by 100 basis points to 11.25 percent to ease inflationary pressure.
Analysts point out that Colombia's consumer price index will reach 6.3 percent by the end of the year, entering a period of severe inflation.
Local residents reported sharp increases in basic staples as supply-side shocks ripple through the domestic economy.
"It's even hard to buy groceries now because everything is expensive. I found that the most expensive items in the market are meat, chicken and fish. Everything is getting more expensive," said Alba Bernal, a resident.
"The U.S.-Iran conflict has led to rising oil and agricultural product prices, which means that inflation will occur in the future as the prices of agricultural fertilizers and fuel will rise, thereby triggering supply-side inflation," Oscar Loaiza, a professor of the Pilot University of Colombia, explained.
The central bank said in a recent report that although Colombian oil exports have benefited from rising oil prices, basic commodities the country need, such as natural gas and fertilizers, have become more expensive. It also noted that raising interest rates would help curb domestic demand and alleviate inflationary pressures. Moreover, it can stabilize the local currency exchange rate, reduce the risk of capital outflows, and maintain the purchasing power of the Colombian currency.
Market analysts warn that higher rates could slow the economy, leading to lower domestic investment and weaker consumer spending. Therefore, the central bank's policy is viewed as prioritizing inflation control, essentially striking a balance between external shocks and internal stability to avoid a chain reaction on consumption, investment and financial stability.
"There is no doubt that there is a widespread shock. The current inflation rate has exceeded 5 percent," said Carlos Sepulveda, a professor at the Universidad del Rosario in Colombia, adding that the forecast at the beginning of the year or by the end of 2025 was just 4 percent.
The war in Iran is pushing up oil prices and global inflation expectations. That is forcing countries including Colombia to adjust their monetary policies. Raising the interest rates is both a passive response to imported inflation and a measure to maintain macroeconomic stability.
Colombia braces for inflation as Middle East conflict disrupts global trade
