Chilean Consumer Prices Post Biggest Decline in 20 Months

Chilean consumer prices fell more than economists expected in December, posting the biggest decline since April 2013, as gasoline costs tumbled.

Prices slid 0.4 percent in the month, the National Statistics Institute said today, compared with median estimate of 18 analysts surveyed by Bloomberg for a decline of 0.3 percent. The annual inflation rate eased to 4.6 percent from 5.5 percent. Core prices, which exclude fuel and produce, climbed 0.3 percent in the month, the agency said.

The central bank, which has cut its key interest rate eight times in the past 15 months, maintained its inflation estimate for this year at 2.8 percent on Dec. 15, predicting a steep slowdown in the first half of the year amid the slowest economic growth since the 2009 recession. The upside and downside risks to that inflation outlook are balanced, said policy makers, who target price-growth of 2 percent to 4 percent.

“We should see significant falls in the annual rate in the next few months,” said Nathan Pincheira, an economist at Banchile Inversiones in Santiago. The central bank will act “once inflation approaches the 3 percent target.”

Gasoline costs tumbled 9.9 percent in December, knocking 0.353 of a percentage point off the inflation rate, as international oil prices tumbled.

Inflation Confidence

The high base of comparative inflation last year, “the evolution of gasoline prices and the accumulation of output gaps in the economy will cause a decrease towards 3 percent in 2015,” bank President Rodrigo Vergara told lawmakers last month. “Then, it will fluctuate around 3 percent until the last quarter of 2016.”

Inflation expectations for the two years ahead remain anchored at 3 percent, according to the central bank´s monthly poll of analysts published on Dec. 11.

Policy makers said their forecast was based on the prospect of a continuing output gap and wage increases in line with productivity gains. Wages climbed 7 percent in November from the year earlier, the second-fastest pace in five years, the national statistics institute said yesterday.

The jobless rate unexpectedly fell to 6.1 percent in the three months through November from 6.4 percent in the month-earlier period, even after economic growth slowed to an annual 0.8 percent in the third quarter.

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