February inflation in Chile moderates but still high; beware of consequences of the Russia/Ukraine war

Thursday, March 10th 2022 - 19:51 UTC

Full article

Twelve month inflation is still 7,8%, with the price of bread having increased 15% in the last twelve months, beef 23,3% and gasoline 31,3%

Inflation in Chile during February climbed 0,3%, well below market expectations, but still 7,8% in the last twelve months, the highest recorded since November 2008. The release was done by the country's stats institute, INE, and was indeed a positive announcement given the private estimates (0,6% and 0,7%) and the fact that inflation was effectively surging, 1,2% in January.

Ten of the twelve items from the INE release and which make up the Consumer Price Index, CPI, reported monthly increases while the remaining two, decreases. The steepest item was food and non alcoholic beverage, 1,8%, Housing and basic services, 0.9%. At the other end Culture and Leisure were down 5,2%. More specifically bread for example in the second month of the year climbed 3,2% and 15% in the last twelve months. Beef was up 2,8% and 23,3%. New family car, 1,7% and 20,6% while gasoline was up 1,9% on the month and 31,3% in the twelve months.

While tourism packages dropped 24,3% in February and 31.8%, and air transport, was down 17,5% and 47,9% annually.

The outgoing Finance minister Rodrigo Cerda (March 11 a new government takes office in Chile) said “it was good news”, but warned that the inflation inertia is still alive. The latest release shows some volatile prices reverted the January tendency, “but are still facing a plus 7% inflation in twelve months, and we need to take pressure from prices”. Government needs to cut expenses and the central bank insist with its interest rate policy, added Cerda.

However the minister Cerda also warned that a close monitoring of the conflict between Russia and Ukraine is needed because of its influence on international prices of commodities and energy. And although Chile is benefitting from soaring copper prices, it is a net importer of oil and wheat, “this might have a great impact on gasoline, transport and bread”