Chile Inflation Accelerates to Fastest in 19 Months on Peso

Chile’s inflation rate climbed to the highest in 19 months in December after two interest rate cuts in the past three months fueled a depreciation of the peso.

Inflation accelerated to 3.0 percent from 2.4 percent in November, the National Institute of Statistics said in a report released in Santiago today. The median estimate of 12 economists surveyed by Bloomberg was for inflation of 2.9 percent. In the month, prices gained 0.6 percent.

The central bank cut rates in October and November after domestic demand rose less than gross domestic product for the first time in six quarters in the three months through September, easing pressure on prices. The rate cuts and the prospect of tighter monetary policy in the U.S. led the peso to weaken 5.7 percent against the dollar in the past three months. The price of oil rose 4.7 percent in peso terms last month.

“The sources of inflation are short term and shouldn’t have too much influence on the central bank’s decision,” said Nathan Pincheira, an economist at Banchile Inversiones in Santiago. “December is usually a month of low inflation but there were increases in transport costs because of fuel prices. The central bank can’t do much about international price increases.”

Policy makers kept the benchmark rate on hold at 4.5 percent on Dec. 12 after inflation accelerated more than expected in November, climbing back to the 2 percent to 4 percent target range for only the third time in the previous 12 months. The next rate decision is scheduled for Jan. 16.

The bank will probably leave the benchmark rate unchanged at 4.5 percent this month, according to 38 of 56 traders and investors surveyed by the central bank. The other 18 expected a cut to 4.25 percent, the bank said today.

Core prices, which exclude fuel and produce, rose 0.5 percent last month, the statistics agency said.

As of January, the National Statistics Institute introduced changes to calculation methodology that will be reflected in the next inflation figures.

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