Chile's inflation moderation continues at slowing pace

Chile's inflation data for June is due today.

In June, headline inflation likely moderated by one tick to 3.9% while core inflation remained largely unchanged at 5.0% yoy (although it did fall by few bp from 5.05% in May to 4.96% in June), estimates Societe Generale. Given the relatively stubborn trajectory of core inflation, relatively better-than-expected shape of the labour market (and the wages) and the renewed pressure on peso.

"We see some upside risk to our full year headline and core inflation forecasts of 3.8% and 4.7%. While headline inflation is expected to stay above 3% until the end of the year, core inflation could stay above 3.5% over the next 12 months", said Societe Generale in a report on Wednesday. 
 
However, unless the CLP depreciates significantly, it is unlikely to keep inflation above 4% over the medium term, the upper bound in the BCCh's target range. The downside risks to the forecasts relate to further weakness in the economy leading to the deterioration in the labour market, adds SocGen. For now, therefore, growth remains the key concern for monetary policy.