(Bloomberg) -- Colombian President Gustavo Petro blamed a plunge in the peso caused by US monetary tightening for soaring consumer prices.
Most Read from Bloomberg
“Inflation is caused by a deep drop in the Colombian peso,” Petro said Wednesday, in an interview with Bloomberg TV. “Everything became more expensive for us.”
Petro, 62, took office last month with consumer prices rising at the fastest pace in nearly a quarter of a century. Other currencies, including the euro, have been hit by the same trends, he said. The US Federal Reserve raised interest rates by three quarters of a percentage point on Wednesday, and signaled more aggressive hikes ahead than investors had expected.
The peso has weakened 11% since Petro won the election in June, the worst performance after Argentina among major emerging markets. Amid a general selloff that affected most developing nations, some investors were also spooked by Petro’s plans to phase out oil and coal, Colombia’s biggest exports.
Read more: Powell Signals More Pain to Come With Fed Sending Rates Higher
To help reduce food costs, he said his administration is considering subsidizing fertilizers.
As the government phases out gasoline subsidies, it will try to mitigate the impact on the poorest, he added. It will do this by helping poorer Colombians who use motorbikes for their work, he said. The government will also keep the price of diesel fixed, since this affects food prices through trucking costs.
Read more: Inflation Upends Politics in the Most Unequal Region on Earth
At the moment, Colombia is getting high prices for its oil and coal exports, but this could change suddenly if the war in Ukraine ends, he said.
“That’s why I aspire to change the oil and coal economy for one based on tourism, in the short term, due to the beauty of our country,” he said.
Petro took office in August, becoming the first leftist to hold power in a country that has only ever been run by conservatives and liberals. On his first day in office, his administration sent a bill to congress that seeks to impose higher taxes on the rich, as well as on oil and coal producers.
Colombian inflation accelerated to 10.8% last month, its fastest pace since 1999, led by a 26% rise in food prices.
Most Read from Bloomberg Businessweek
©2022 Bloomberg L.P.