(Bloomberg) -- Chile’s consumer prices rose roughly in line with expectations last month, as investors parse volatile economic data and mull how much space central bankers will have to cut interest rates at their next meeting.
Prices increased 0.2% in November compared to October, just below the 0.3% median estimate from analysts in a Bloomberg survey, the national statistics institute reported on Friday. Annual inflation slowed to 4.2%.
Chilean policymakers led by Rosanna Costa are counterbalancing inflation above the 3% target with economic growth that has struggled to gain traction. While overall activity rose in October in the central bank’s latest reading, the expansion was concentrated in services, and key sectors such as mining and commerce declined. Still, the monetary authority has warned of more persistent cost-of-living rises due to factors including global geopolitical tensions.
What Bloomberg Economics Says
“Slower Chilean inflation in November provides some relief from a sharp increase in October, but results show signs of lingering upward pressure on prices from accumulated peso depreciation and producers passing costs to consumers. The headline was in line with consensus and central bank forecasts, but the core came in hotter than expected. The print lowers the probability that policymakers cut interest rates at their Dec. 17 meeting.”
— Felipe Hernandez, Latin America economist
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Energy costs fell 0.6% on the month in November following a surge the month prior, according to the national statistics institute. Food and non-alcoholic beverage prices slipped by 0.3% during the period.
On the other hand, household items jumped 1.6% in the biggest increase among the categories measured, while communications products rose by 0.8%.
After the release, some private sector economists said their own calculations showed a higher overall monthly price increase near 0.25%, which would be rounded up to 0.3%.
Central bankers have cut borrowing costs by 6 percentage points since mid-2023, and opted for cautious, quarter-point reductions in their recent meetings as domestic electricity tariffs jump. Economists surveyed by the monetary authority in November expect another drop of the same size at the Dec. 17 decision, a move which would lower rates to 5%.
Investors’ inflation expectations remain anchored at the official target in two years, which bodes well for more monetary easing. While the peso has weakened nearly 10% since the start of 2024, the pass-through to consumer prices has been tempered by uneven demand.
Finance Minister Mario Marcel said this week that gross domestic product will expand 2.4% in 2024, below the government’s most recent forecast of 2.6%. “The big challenge for coming months, above all for 2025, is investment,” he said.
--With assistance from Giovanna Serafim.
(Updates with economist quotes in the fourth paragraph and comments on INE’s calculation in the seventh paragraph)
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