Chilean Traders Project Faster Inflation; Peso Little Changed

Chilean traders’ short-term inflation expectations rose after the country’s state-owned refiner said fuel prices would rise the most in a month.

The six-month breakeven rate, a gauge of expectations for the average annual pace of inflation during the period, rose seven basis points, or 0.07 percentage point, to 3.07 percent, the highest since September. The one-year breakeven rate climbed two basis points to 3.05 percent.

The wholesale price of basic gasoline will increase 2.2 percent for the week through Feb. 20, Empresa Nacional del Petroleo said in an e-mailed statement after the market closed yesterday. The National Statistics Institute reported on Feb. 8 that Chilean consumer prices rose 0.2 percent in January from a month earlier, surprising traders in the forwards market who were pricing in a 0.04 percent drop. The annual pace accelerated to 1.6 percent from an 18-month low of 1.5 percent.

“Inflation expectations started slowly to rise after last week’s CPI number,” said Sebastian Senzacqua, an economist at Bice Inversiones in Santiago. “We are seeing a more inflationary scenario in coming months, and the gasoline prices could mean more inflation in February.”

Bice forecasts another 0.2 percent increase in February and may increase that projection when it calculates the impact of this week’s fuel price boost, Senzacqua said.

Traders of forwards for unidades de fomento, Chile’s inflation-linked accounting unit, increased their expectation for inflation in 2013 to 3.06 percent today from 2.82 percent on Feb. 7.

The peso closed little changed at 470.85 per U.S. dollar after appreciating yesterday to 470.65, the strongest level since Jan. 24.

International investors in the Chilean peso forwards market raised their net bets against the currency to $1.9 billion on Feb. 12, a $1.3 billion increase from Jan. 31