Chile’s Inflation Cools In August

Year-on-year inflation during the month was 5.3%, the lowest in almost two years

A fruit and vegetable vendor in La Vega Central market in Santiago, Chile. Photographer: Cristóbal Olivares/Bloomberg
September 08, 2023 | 04:35 PM

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Santiago — Inflation continues to cool in Chile, with the consumer price index (CPI) rising just 0.1% in August with respect to the previous month, according to data from the country’s statistics bureau INE, and which was below the median estimate of a Bloomberg survey (0.4%).

Viewed from a broader spectrum, inflation in Chile has gradually cooled over the last year. In August, the year-on-year CPI was 5.3%, the lowest level since September 2021.

Chile’s statistics bureau INE announced the figure in a tweet on Friday.

On the other hand, the CPI without volatile elements fell 0.1% in August compared to July, but rose 7.4% over the 12 months to August.

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Prices accumulated an increase of 2.6% in the eighth month of the year. The central bank of Chile, in its monetary policy report published this week, anticipates that total inflation will have an annual variation of 4.3% at the end of 2023.

Chile has been one of the most aggressive countries in combating inflation in Latin America. The key interest rate rose from 0.5% in July 2021 to 11.25% in October 2022. It remained at the latter level until the end of July this year, when it began a cycle of monetary policy easing in the face of moderating prices.

On Tuesday, the central bank’s board of directors decided to apply a new cut. This time the cut was 75 basis points, leaving the interest rate at 9.5%.

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Which prices rose the most in August?

According to INE, seven of the 12 divisions that make up the CPI basket had a positive impact on the monthly variation of the index, four had a negative impact and one had no impact at all.

Among the divisions with price increases, food and non-alcoholic beverages stood out (0.3%), which contributed 0.074 percentage points. In detail, the most important increases were recorded in vegetables, legumes and tubers (2.8%), which contributed 0.080 pp.; and fruits (2.2%), with a contribution of 0.024%.

Of the 76 products that make up the food and non-alcoholic beverages division, 46 recorded price increases, with potatoes (10.8%) and tomatoes (7.4%) standing out for their sharp hikes.

Potato prices rose in Augustdfd

There was also an increase in the housing and basic services division (0.4%), with 0.051 pp. From there, several products experienced increases, with gas standing out.

But there were also declines in some prices that, such as miscellaneous goods and services (-0.8%) stood out, with -0.043 percentage points.