Chile’s Consumer Prices Rise Less Than All Analyst Forecasts in March
(Bloomberg) -- Chile’s consumer prices rose less than expected in March, providing some respite to the central bank after policymakers warned it will take longer for inflation to slow to target.
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Prices rose 0.4% compared to February, below all forecasts in a Bloomberg survey that had a 0.6% median estimate. Annual inflation eased to 3.7% in the chained series, the national statistics institute reported on Monday.
Chile’s central bank slowed its pace of interest rate cuts last week and also raised its inflation and economic growth estimates for this year. Local cost-of-living increases have been pressured by a weaker currency, which makes imports more expensive. The board’s cautious stance, together with signs that the Federal Reserve may further delay the start of its own borrowing cost reductions, prompted analysts to bet on a shallower domestic easing cycle.
Read more: Chile Slows Easing Pace and Signals Cautious Rate Cuts Ahead
“This is a benign inflation report, highlighting that underlying price pressures are under control,” Andres Abadia, chief Latin America economist at Pantheon Macroeconomics, wrote in a note. “We expect the headline inflation rate to continue declining at the margin over the coming months, as pressures on the currency ease and economic activity remains relatively modest.”
Education Costs
Education costs jumped 5.4% on the month, coinciding with the start of the local academic year, according to the statistics agency. Housing and utilities represented another top inflation driver, rising 0.8% compared to February.
On the other hand, food and non-alcoholic beverages fell 0.9% during the period, with declines in staple products such as meat and bread.
What Bloomberg Economics Says
“March Chile inflation data show rising upward pressure from energy prices and fading downside pressure from core tradable goods. The results were in line with central bank forecasts for headline and core inflation to hold above the midpoint of the 3% +/- 1 percentage point target this year. They back the smaller interest-rate cut last week and policymakers’ less dovish outlook.”
— Felipe Hernandez, Latin America economist
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Policymakers led by Rosanna Costa lowered rates to 6.5% last Tuesday, extending a cycle that’s slashed borrowing costs by 4.75 percentage points. In a hawkish tilt, board members removed their prior guidance that rates would fall to a neutral level later in 2024.
Inflation will end this year at 3.8%, above the prior forecast of 2.9% and also the 3% target, central bankers wrote in their monetary policy report published the following day. Domestic prices have been pressured by both a depreciated peso and global cost increases, they said.
Chile’s currency is down about 7.8% against the dollar this year, marking the biggest drop in emerging markets behind just the Turkish lira.
--With assistance from Giovanna Serafim.
(Updates with economist quotes starting in fourth paragraph, details from inflation report starting in fifth paragraph)
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