Notes on the 4.82% inflation rate in June in Colombia.

The latest available monetary poverty results, according to official sources, correspond to the year 2.023. They establish that monetary poverty and extreme monetary poverty are measured as follows: the former is the population whose monthly per capita income is in the range of $0 to $435.375, and the latter is between $0 and $218.846. 1/

Thus, those classified as poor are 33% of the population, and those living in extreme poverty are 11.4%.

Also, apart from the poor, another segment of the population is vulnerable, which is 31.5% of the population. The middle class and the upper class are 32.4% and 3.1%, respectively. 2/

This means that the poor and vulnerable populations total 64.5% of the Colombian population.

Given all of the above, it is clear that high inflation harms the poor and vulnerable more than the upper and middle classes. 3/ High inflation is defined as inflation above the target range established by the monetary authority, between 2% and 4%. There is no pause in the decisions made there to reach the goal; they remain focused on achieving it.

With the latest inflation result of 4.82% 4/ presented yesterday by the official source for the month of june, a positive step has been taken toward the purchasing power of the poor and vulnerable population 5/ and the monetary authority is determined to decide at the next meeting whether to lower or leave the interest rate unchanged. Given that the inflation level for may was 5.05% and the decline recorded in june, it is likely that at that next meeting there will be a majority or consensus to reduce the interest rate by 25 basis points to 9%.

However, the decision will continue to be very cautious, awaiting the next monthly inflation levels, as there will be inflationary pressures due to the level of public spending relative to income.

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1/ This last figure was taken to present, in the current Pension Reform (approved by the Congress of the Republic and pending the substantive opinion of the Constitutional Court), the value of $230.000 pesos as an allowance for senior citizens in the solidarity pillar, estimated at 3 million people.

2/ The vulnerable population is those whose monthly per capita income falls between the poverty line ($435.375) and $853.608. The middle class falls between per capita incomes of $853.608 and $4.596.352. The upper class corresponds to per capita incomes above $4.596.352.

For example, a family of four, with two working people (and two children in school) earning a combined salary of $25.000.000, represents the individual members of this family, since in the income per person calculation, each person earns an income of $6.250.000. This is very different from a family considered middle class, also with four people, where, for example, both working people earn a combined income of $15.000.000, and thus each person receives a per capita income of $3.750.000.

Of course, high incomes at family income levels above $25.000.000 (which was the example provided above) mark greater differences compared to other social classes and represent a smaller percentage of people, since they are only a fraction of the total upper class, which, as mentioned above, represents 3.1% of the population.

3/ Seven months after the end of 2.024, there are still no updated poverty figures. The results for 2.023 were released in july of last year, so it is expected that the corresponding figures for 2.024 will be released this july.

4/ This disaggregated result shows the following by social class: poor 4.73%, vulnerable 4.62%, middle class 4.79%, and high income 5.02%. Food inflation is 4.31%, which means that inflation among the poor is lower than that among high income people.

5/ Low and stable inflation that tends to fall between 2% and 4% benefits the poor and vulnerable more than others due to their lower income levels.

Low inflation clearly has no effect on reducing inequality in monetary income as set out in this note by social class (a measure of this inequality is the Gini coefficient, which in Colombia reaches a high level compared to the world at 0.55), a reduction that is sought through other mechanisms belonging to public policy together with the private sector.