Chile January Consumer Prices Surge as Core Inflation Slows

Chile’s consumer prices rose faster than analysts forecast last month, even as a slowdown in core inflation keeps pressure off policy makers to raise borrowing costs.

Prices gained 0.2 percent in January, the National Statistics Institute said in a report today, compared with the 0.1 percent median estimate of 17 analysts surveyed by Bloomberg. Core consumer prices, which exclude fuel and produce, grew 0.1 percent after climbing 0.3 percent in December. Annual inflation sped up to 1.6 percent from 1.5 percent in December.

Chile ended 2012 with the slowest inflation among major Latin American countries and the fastest economic growth behind Peru, according to analysts polled by Bloomberg. With core inflation under control, today’s data don’t indicate Chile’s growth is putting the kind of pressure on prices that would prompt policy makers to act, economist Matias Madrid said.

“This confirms the outlook that rates will remain unchanged,” Madrid, chief economist at Banco Penta in Santiago, said by phone. “There is no doubt about that for now.”

Policy makers on Feb. 14 will keep the benchmark borrowing cost at 5 percent for the 13th straight month, according to all 12 analysts polled by Bloomberg. Two-year interest rate swaps, which reflect traders’ views of average borrowing costs, increased two basis points, or 0.02 percentage point, to 5.26 percent at 9:39 a.m. local time.

Breakeven Inflation

Transport and health care led price increases last month, expanding 1.1 percent each from December, while alcohol and tobacco as well as utilities surged 1 percent and 0.6 percent respectively, according to the institute. Financial expenses dropped 6.4 percent after the government cut taxes on loans, while airline and clothing prices slipped 11 percent and 3.1 percent respectively, it said.

Two-year breakeven inflation, which is derived from the difference between nominal and inflation-linked yields on swaps, increased six basis points to 2.96 percent at 9:44 a.m. Policy makers target 3 percent inflation, plus or minus one percentage point over 24 months.

The world’s top copper producer will grow 4.5 percent in 2013 after expanding an estimated 5.45 percent in 2012, according to the median estimate of analysts surveyed by Bloomberg.

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