LONDON: Chile’s inflation is likely to have decelerated below the target ceiling in July. Throughout 2016, inflation has been slowing in the nation; however, it has continued to stay above the central bank’s target ceiling. But it is expected to have decelerated to 3.9 percent year-on-year in July and 0.1 percent month-on-month, stated Societe Generale in a research report. Moreover, since January, core inflation has been on a downward path and is expected to have fallen by 0.1 percentage points to 0.1 percent month-on-month in July.
The Chilean currency had strengthened by around 3.5 percent in July on a month-on-month basis and dropped around 0.7 percent on a year-on-year basis, as compared with an average rate of 11 percent up to June. “We forecast inflation to print at 4.3 percent in 2016, as the CLP remains at an elevated level (CLP has been at a level of 685 on average in 2016) and there is the near-term prospect of pass-through,” added Societe Generale.
In the meantime, the slow adjustment of the subdued growth and labor market is likely to exert downward pressure on inflation, especially in the context of a dovish Fed outlook. Therefore, inflation is likely to considerably slowdown from 2017 onwards. In the midst of all this, the Chilean central bank has been in a wait-and-watch mode since the beginning of 2016 given the weakness of economic growth.
