Chile’s inflation likely to have accelerated slightly in June

Inflation in Chile is likely to have accelerated slightly in June. According to a Societe Generale’s research report, Chile’s headline inflation is expected to have risen a bit to 4.3 percent year-on-year and 0.3 percent month-on-month in June.

Through 2016, inflation has been moderating; however, it continued to be above the central bank’s target ceiling. Core inflation has also been slowing since January and is likely to have remained steady at -0.1 percent month-on-month in June, added Societe Generale.

This is in line with the entire year’s inflation projection. Inflation is likely to reach 4.3 percent in 2016, as the currency continues to be at a high level and there is the near-term outlook of pass-through, noted Societe Generale. But the subdued growth and the gradual adjustment of the labor market should outweigh the peso effect from the second half of 2017. Therefore, inflation is likely to slow considerably from 2017.

In the mean time, the Chilean central bank has kept a wait-and-see stance since the beginning of 2016, given the subdued growth. Even if inflation has continued to be more than the target ceiling, the central bank is likely to tolerate inflation of about four percent as long as it is slowing and the growth situation remains subdued, said Societe Generale. The BCCH is expected to continue with its present level of monetary accommodation.