Bloomberg — Chilean consumer prices rose more than expected last month, as the central bank emphasizes it will proceed with cautious interest rate cuts after leading reductions in Latin America last year.
The consumer price index rose 0.5% in April from March, above the median estimate of 0.4% of analysts surveyed by Bloomberg. The annual inflation rate increased to 4%, compared to 3.7% in the index’s spliced series, the National Institute of Statistics reported on Wednesday.
Chilean economists and traders expect the central bank to slow the pace of its easing cycle for the second consecutive time, with a half-point rate cut on May 23. Investors expect this smaller reduction after policymakers highlighted global risks, including higher interest rates for a longer period. Even so, cost of living projections remain anchored at the 3% goal over the two-year policy horizon.
Prices of food and non-alcoholic beverages rose 0.7% monthly in April, while transportation increased 1.1%, according to the statistics institute. For their part, clothing prices fell 1.9%.
Read more: Central Bank of Chile warns of lagging sectors in the midst of economic recovery
Plans to extend one of the world’s biggest rate-cutting cycles remain intact as policymakers have already factored new global risks into their outlook, central bank Chair Rosanna Costa said in an interview last month. Decisions on further reductions in borrowing costs will be cautious, taking into account macroeconomic developments, she said.
Since last July, authorities have reduced borrowing costs to 6.5% from a more than two-decade high of 11.25%.
The central bank has gained some relief following the recent rises in the peso, which has appreciated more than 4% since the last monetary policy meeting on April 2. A weaker currency fuels inflationary pressures by making imports more expensive, and Chile is vulnerable given that it is a relatively small and open economy.
The Central Bank of Chile foresees annual inflation of 3.8% in December and 3% at the end of 2025, according to estimates published last month.
Read more at Bloomberg.com
