Inflation in Chile: Price deceleration returns – London Business News | Londonlovesbusiness.com

Inflation in Chile saw a significant slowdown in September 2024, providing relief from the inflationary pressures that had affected the country in recent months.

The annual inflation rate dropped to 4.1%, down from a nine-month high of 4.7% in August, indicating a substantial moderation in price growth.

This six-tenths reduction marks the first inflationary decline after five consecutive months of increases.

On a monthly basis, consumer prices rose a modest 0.1%, significantly below the 0.3% increase recorded in August and also below market expectations, which had anticipated a 0.3% rise.

This moderate increase was mainly influenced by a decline in food and non-alcoholic beverage prices, which fell by 0.5%, and alcoholic beverages and tobacco, which dropped by 0.4%. These decreases contrast with the increases seen in previous months and reflect a generalized slowdown in key sectors. Additionally, transportationalso experienced a 0.3% decline, reinforcing the trend of easing price pressures.

This inflation slowdown follows the release of August data that showed a significant drop in producer prices, suggesting that the cooling of production costs is being passed on to consumers. Producer prices in Chile increased by 9% year-on-year in August, a five-month low, slowing from the 14.5% recorded in July. This decline was driven by falling costs in the mining and manufacturing sectors, which are critical to the Chilean economy.

The decline in inflation places the annual rate slightly above the upper range of the Central Bank of Chile’s target, which fluctuates between 2% and 4%. This relief in inflationary pressures gives the Central Bank more room to continue its interest rate cut cycle. After a somewhat cautious approach recently due to inflation concerns, the bank is expected to resume cuts in upcoming meetings, contributing to a stronger economic recovery.

In the foreign exchange market, the Chilean peso has been susceptible to the strength of the U.S. dollar and global market tensions, particularly due to disappointing stimulus measures from China, a key trading partner for Chile. The CLP lost about 1% on the day, reflecting a lack of confidence in China’s ability to revitalize its economy through significant stimulus measures. Additionally, the price of copper, one of Chile’s main export products, fell by 2%, adding pressure to the local currency.

The inflation slowdown in September is a positive sign for Chile’s economic stability. The decline in consumer and producer prices points to a more favorable environment for the Central Bank, which could continue its rate cuts to boost economic activity. However, the international context, particularly China’s economic situation and the strength of the U.S. dollar, will now be key factors in the future performance of the Chilean peso and the country’s economy overall.”