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Chile Inflation August 2023

Chile: Inflation falls to lowest level since August 2021 in August

Inflation dropped to 5.3% in August from July’s 6.5%. August’s result represented the weakest inflation rate since August 2021. The result was driven by moderating price pressures for food and non-alcoholic beverages and transportation.

Annual average inflation fell to 10.4% in August (July: 11.1%). Meanwhile, core inflation fell to 5.2% in August, down from the previous month’s 6.2% and marking a near two-year low.

Finally, consumer prices increased 0.11% in August over the previous month, below July’s 0.35% rise and the 0.4% increase expected by markets.

August’s data will likely encourage the Central Bank to keep cutting rates at its next meeting on 25–26 October; our panelists see over 150 basis points of loosening by year-end.

On the inflation and monetary outlook, Itaú Unibanco analysts said:

“While we expect some payback in coming months along with increased pass-through pressures, higher gasoline prices and food price strain following intense rainfalls (already seen in potato prices: +33% in the last two months), the swifter inflation fall should lead to expectations of even larger policy rate cuts in the near term. […] We preliminarily expect a 0.5-0.6% monthly increase [in September prices]. We expect a 3.9% yearend [inflation] rate but with risks still tilted to the upside given recent supply shocks.”

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