Chile’s consumer prices experienced a modest increase in September, rising only 0.1% from August, which aligns with the lowest predictions in a recent Bloomberg survey. The annual inflation rate declined to 4.1%, though it remains above the central bank’s target of 3%. This data, reported by the National Statistics Institute, comes as a positive development for policymakers who are expected to cut interest rates again next week.
Led by Central Bank Governor Rosanna Costa, officials are navigating through a challenging economic landscape marked by rising electricity tariffs, with another hike anticipated in October. This situation is likely to exert additional pressure on the cost of living into early 2025. Despite these challenges, consumer demand remains inconsistent, and sectors like real estate are still struggling, which contributes to a cooling of inflationary pressures.
Felipe Hernandez, a Latin America economist at Bloomberg Economics, noted that September’s inflation figures fell slightly below the central bank’s expectations. However, he cautioned that an acceleration in inflation could occur in the fourth quarter and early next year. The analysis highlighted that core services inflation persisted while core goods inflation saw an uptick during the month.
Food and non-alcoholic beverage prices dropped by 0.5%, while costs for alcoholic beverages, tobacco, and transportation also decreased. In contrast, clothing prices surged by 3.3%.
Looking ahead, the central bank indicated that it might lower borrowing costs from the current rate of 5.5% towards a more neutral level between 3.5% and 4.5%. Finance Minister Mario Marcel emphasized that lower gasoline prices and recent gains in the peso would help mitigate the inflationary effects of increased electricity tariffs.
As economic activity contracted by 0.2% in August, analysts predict the central bank will implement quarter-point rate cuts on October 17 and in December, responding to these evolving economic dynamics.
