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Turnleaf expects Colombia CPI to accelerate towards 6% YoY starting January 2026 following a 23.7% minimum wage increase that took effect on January 1—a significant upward revision from our Jan 2, 2025 forecast. Our initial projection applied conservative assumptions given limited historical precedent for pass-through from a wage shock of this magnitude. However, recent high-frequency data from Turnleaf’s proprietary inflation volume index for transportation, which tracks media mentions of transportation price changes, now shows sharp upward momentum consistent with the anticipated spike in services inflation as annual service prices indexed to the minimum wage reset at the start of the year.

Simultaneously, emergency tax measures announced via presidential decree on December 29, 2025 will reinforce upward price momentum, as the government prioritizes fiscal consolidation. This also adds to sharp upward price momentum, The emergency measures include VAT increases on alcoholic beverages from 5% to 19% and new excise taxes on tobacco products and tobacco derivatives like vapes. Notably, the controversial fuel tax increases proposed in the original tax reform were excluded from the final emergency decree, providing some relief to consumers.

Geopolitical developments in neighboring Venezuela have introduced fresh uncertainty into Colombia’s inflation outlook. Following US military strikes on Venezuela on January 3, 2026 and the capture of President Nicolás Maduro, tensions between the US and Colombia have escalated. Despite this volatility, the Colombian peso has remained relatively stable, trading around 3,710-3,790 COP/USD in early January 2026 (Figure 1).

Figure 1

The magnitude of the minimum wage increase will drive significant services inflation as annual service prices indexed to the minimum wage reset at the start of the year. Turnleaf’s proprietary inflation volume index for transportation, which tracks media mentions of transportation price changes, has shown upward momentum consistent with this transmission channel (Figure 2). The wage-indexed nature of many service contracts suggests immediate pass-through to consumer prices in January.

Figure 2

Inflation expectations will likely rise in the short term as households perceive broad-based service price increases, potentially keeping Colombia’s inflation trajectory elevated relative to 2025. The government has discussed potential price controls to mitigate the impact of the minimum wage hike, though such measures introduce additional uncertainty. Food prices remain vulnerable to weather shocks but have been relatively stable, with December 2025 food inflation declining to 5.07% YoY from 5.74% in November.

A lingering upside risk stems from Colombia’s natural gas market. Volatile extraction prices signal unstable domestic production capacity, as seen during 2022-2023 when sharp cost increases coincided with peso weakness. Should extraction price pressures re-emerge in 2026, limited domestic supply would force greater import dependency, amplifying inflation risks through both direct energy costs and potential currency depreciation (Figure 3).

Figure 3

While the World Uncertainty Index for Colombia has begun rising due to US intervention in Venezuela, oil market reactions have been muted (Figure 4). Outdated Venezuelan infrastructure and political instability have limited market expectations for immediate oil supply increases. The current combination of lower oil prices, constrained natural gas supply, and stable exchange rate dynamics suggests moderate inflation pressure from commodity markets, though any external shock could trigger elevated inflation paths.

Figure 4

Based on current macroeconomic conditions, Turnleaf expects Colombia inflation to accelerate towards 6% YoY in January 2026 and gradually decline towards 5% by year-end as base effects normalize and the minimum wage shock dissipates through the system (Figure 5 – PAID).

Figure 5

To access Turnleaf’s 12-month inflation forecast for Colombia, visit our latest Substack post here.