• Chile’s inflation seems to have eased to 3.5 pct in August

    Source: FxWire Pro - Commentary / 07 Sep 2016 08:55:37   Eastern Standard Time

    Chile’s inflation is expected to have decelerated into target range in August. Consumer prices in the country have been slowing in 2016, though it has continued to stay above the central bank’s target ceiling. But the headline inflation is likely to have decline below the target ceiling for the first time this year and is anticipated to have come in at 3.5 percent year-on-year and 0.2 percent month-on-month, said Societe Generale in a research report.

    Core inflation has also been falling since January and is likely to have decelerated to 0.2 percent month-on-month in August from July’s 0.4 percent. Weak demand growth, a stabilizing peso and ongoing wage moderation has resulted in inflation decelerating in 2016. The CLP rose 4.4 percent year-on-year in August for the first time in 38 months, as compared with the average pace of depreciation of 10 percent up to July.

    Assuming that all the factors would continue to be in play in the future, inflation is expected to further slowdown, added Societe Generale. Moreover, the U.S. Fed is unlikely to hike its rates in 2016, which should assist the peso to remain at current levels. In the midst of all this, the BCCh has kept a wait-and-watch mode since the beginning of the year given the weakness in growth.

    “With sub-trend growth and no Fed rate hike expected until December, we expect the BCCh to continue its current level of monetary accommodation over the medium term”, noted Societe Generale.