Chile Sept. Consumer Prices Rose Faster-Than-Forecast 0.8%

Chilean consumer prices rose 0.8 percent in September from the previous month, the fastest pace since March 2011.

The median estimate of 11 analysts surveyed by Bloomberg was for prices to increase 0.6 percent. Annual inflation accelerated to 2.8 percent from 2.6 percent in August, the National Statistics Institute said in a report today. Core consumer prices, which exclude fuel and produce, climbed 0.5 percent from August.

While the inflation rate has fallen from 4.4 percent at the end of last year, consumer-price pressures persist after economic growth in the Andean nation accelerated in the second quarter, central bank board members said in last month’s meeting. That threat to prices weighed on policy makers as they opted against monetary easing in September.

“The option to lower the monetary policy rate was ruled out on this occasion, taking into account output gap and labor market tightness, which posed a risk to the medium-term inflation outlook,” central bankers said, according to minutes published Oct. 3. “It was probable that the external slowdown would contribute to clear this risk in the coming months.”

Bank board members have kept their benchmark interest rate unchanged at 5 percent for eight straight months following a quarter-point reduction in January that surprised economists. Chile has the highest borrowing costs of major rate-setting Latin American nations behind Brazil.

The one-year interest rate swap, which reflects traders’ views of average borrowing costs, decreased 1 basis point, or 0.01 percentage point, to 4.97 percent yesterday from Sept. 13 when policy makers last met. The next meeting is Oct. 18.

Full Employment

Chile is near full employment after the jobless rate fell to 6.4 percent in the three months through August from 6.6 percent at the beginning of this year, Finance Minister Felipe Larrain told lawmakers in Valparaiso on Oct. 2.

Gross domestic product, which expanded 5.4 percent in the first half of this year, will grow 5 percent this year before slowing to 4.8 percent in 2013, he said. Inflation will pick back up next year, ending 2013 at 3 percent, he said.

Policy makers target 3 percent inflation, plus or minus 1 percentage point over two years.

To contact the reporters on this story: Randall Woods in Santiago at rwoods13@bloomberg.net; Matt Craze in Santiago at mcraze@bloomberg.net

To contact the editor responsible for this story: Philip Sanders at psanders@bloomberg.net

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