Chile April Inflation Rate Rises to Five-Year High

(Corrects to say inflation exceeded target range for first time since 2012 in second paragraph.)

Chile´s inflation rate increased more than analysts forecast in April, rising to the highest level in five years and exceeding the target rate, as the central bank loosened monetary policy and the peso weakened.

Inflation accelerated to 4.3 percent from 3.5 percent the month before, the National Statistics Institute said today, above the 3.9 percent median estimate of 13 economists surveyed by Bloomberg. April was the first time inflation has exceeded the target range since February, 2012. In the month, prices gained 0.6 percent.

Policy makers have cut interest rates four times in the past seven months as the economy grows at the slowest pace since the 2009 recession, even as inflation accelerates. In the minutes from its last meeting on April 17, central bankers said rates could fall further as inflation expectations remain anchored at the mid-point of the target range. Since that meeting, the jobless rate has risen and growth slowed.

The bank will probably reduce the benchmark rate a quarter point next week to 3.75 percent, according to 37 of 60 traders and investors surveyed by the central bank. The other 23 expect policy makers to hold the key rate at 4 percent, the bank said on April 23.

Core prices, which exclude fuel and produce, rose 0.8 percent last month, the statistics institute said.

Inflation has accelerated from 1.5 percent in October of last year as a weaker peso pushes up import costs. The peso has declined 8.2 percent against the dollar in the past six months, the worst performing major emerging market currency tracked by Bloomberg after the Argentine peso.

Inflation Expectations

In the minutes of its last meeting, the central bank said the pick-up was probably temporary and that inflation would return to its 3 percent target by year end. Analysts polled by the central bank have kept their forecast for inflation this year at 3 percent all year.

Rising unemployment and slowing growth should help control price increases. The jobless rate reached 6.5 percent in the first quarter, the highest since the three months through October 2012 and above the 6.3 percent median forecast of 18 analysts surveyed by Bloomberg.

The Imacec index, a proxy for gross domestic product, rose 2.8 percent in March from the year earlier, bringing first quarter growth to about 2.4 percent. That compares with full-year growth of 4.1 percent last year and 5.4 percent in 2012.

To contact the reporter on this story: Javiera Quiroga in Santiago at jquiroga5@bloomberg.net

To contact the editors responsible for this story: Andre Soliani at asoliani@bloomberg.net Philip Sanders

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