Chile: Inflation comes in at highest level since November 2023 in February
Inflation increased to 4.5% in February from January’s 3.8%. February’s reading represented the highest inflation rate since November 2023 and was above the Central Bank’s 2.0%–4.0% target range. Looking at the details of the release, prices for food and non-alcoholic beverages and housing, utilities and fuel increased at quicker rates in February. Meanwhile, transportation prices returned to growth following the previous month’s decline.
Annual average inflation fell to 6.3% in February (January: 6.9%). Meanwhile, core inflation rose to 4.2% in February, from January’s 3.8%.
Finally, consumer prices rose 0.59% from the previous month in February, moderating from January’s 0.67% rise but roughly triple market expectations.
Our panelists expect inflation to return to target later this year, and for the Central Bank to keep cutting interest rates at upcoming meetings. However, February’s upside inflation surprise could encourage the Bank to take a more cautious approach to monetary policy easing.
On the monetary policy implications, Itaú Unibanco analysts said:
“High inflation poses challenges for the pace of the BCCh’s easing cycle. Even though inflation fell faster than expected towards the end of last year, along with the BCCh’s recognition that inflationary pressures from the new CPI basket remain subsided, the second consecutive upside inflation surprise poses challenges for the BCCh to continue with large cuts (100bps), in our view. At the margin, tradables inflation is turning the corner, consistent with our view that the exchange rate depreciation will have an effect in the coming months. We have an upside bias to our 2.8% yearend inflation call.”