(Bloomberg) -- Colombia’s inflation accelerated more than expected last month to the fastest pace in over two decades, adding pressure on the central bank to continue its steepest-ever tightening cycle.

The consumer price index rose 13.12% in December from a year prior to the highest since 1999, the statistics agency said Thursday. The result exceeded the forecasts of all 19 economists in a Bloomberg survey. Prices gained 1.26% from the month earlier. 

The increase was led by food, restaurants, hotel services, rents and utilities. Core inflation, which policy makers watch closely as it excludes the most volatile items of the consumer basket, accelerated 9.99% from the same month a year earlier.

Policymakers have raised interest rates by 10.25 percentage points to 12% in the steepest series of hikes since the country implemented its consumer price targeting in 2000, and more tightening is expected this month. The central bank aims for inflation at 3%, plus or minus one percentage point, and recently said it would hit that goal by the end of 2024.

What Bloomberg Economics Says

“Colombian inflation extended its worrisome uptrend in December. It remained uncomfortably high and pointed to resilient upward pressure on prices. Inflation expectations are likely to continue rising and policymakers are poised to revise up their forecasts again following the higher-than-expected print.”

—Felipe Hernandez, Latin America economist

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All of Latin America’s major inflation-targeting central banks have raised interest rates sharply to counter the worst bout of cost-of-living increases in a generation. But while Brazil and Chile have already halted tightening as inflationary pressures ease, Colombia is still grappling with surging price rises. 

Peru and Mexico are also still raising borrowing costs. Colombia’s central bank Governor Leonardo Villar signaled the series of rate hikes is nearing an end.

Read more: Colombia Central Bank Chief Says Interest Rate Hikes Near an End

Broad-based Pressures

The government has been raising fuel prices since October to reduce public subsidies. This month the Energy Ministry doubled the pace of gasoline increases, adding to inflationary pressures.

Food prices continue to rise, the peso was the third-worst performer among emerging markets tracked by Bloomberg last year and the government increased the minimum wage 16%. Although officials have passed regulations to unlink goods and services from the minimum wage, the indexation will impact inflation this year, said Juan Pablo Espinosa, chief economist at Bancolombia.

“The balance is that inflation starts the year with significant pressures that will take significant time to moderate,” Espinosa said. “Food inflation is still very worrying.”

Espinosa forecasts that inflation peaked in December and that the central bank will deliver a final interest rate increase at its Jan. 27 meeting to end the tightening cycle at 12.5% or 13%.

--With assistance from Rafael Gayol.

(Updates with analyst comment in fifth paragraph)

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