And after a long time, annual inflation in Chile broke below the Central Bank’s target.
According to the National Institute of Statistics (INE), the Consumer Price Index (CPI) for January of this year varied by 0.4%, accumulating 0.4% in the year and leaving year-on-year inflation at 2.8%.
Es the first time since February 2021 that the main thermometer of price variation in our country is below 3%. After that date, an inflationary spiral began, driven by both internal and external factors.
Inflation fell from the 3% target
On the one hand, the disruptions in global supply chains, due to the Covid-19 pandemic, They still showed effects on some imported products, which affected various industries and sectors.
In turn, the state aid, but especially the AFP withdrawals, They injected a significant amount of liquidity into families, boosting consumption, but also putting inflationary pressures.
The peak was reached in August 2022, when the CPI rose 1.2% and the interannual variation reached 14.1%.
In response to the rise in prices – where money loses real value, since the same amount can no longer buy the same thing as before -, the Central Bank saw the need to raise interest rates, in an attempt to prioritize savings – thanks to this, time deposits became extremely profitable – over indebtedness.
The increases in the Monetary Policy Rate (MPR) began in July 2021, reaching their maximum in October 2022 in the 11,25%, remaining until July of the following year, where the stage of cuts began which, with some pauses during 2025, Now it has interest rates at 4.50%.
What’s coming now?
Ignacio Mieres, Head of Research at XTB Latam, highlighted that inflation will remain at its lowest level since the beginning of 2021, stating that it is “a positive sign and reflects the effectiveness of the monetary normalization process.”
“However, at the component level Sources of pressure persist, particularly in the housing sector, whose increases continue at high levels,” the expert warned.
In this sense, he pointed out that in the short term, the monthly data “show greater progress than expected by the market, which suggests that convergence could be less linear,” while transportation prices continue to provide upward pressure.
Thus, from the investment platform they estimate that the issuing entity “would maintain a moderate monetary policy stance at its next meeting, conditioned on the trajectory of the incoming data.”
For his part, the economist and investment strategist in Zurich, Gustavo Yana, pointed out that inflation will be influenced by the high comparison base and downward pressures from the exchange rate.
“Going forward, additional movements in the MPR will continue to be conditioned both by the evolution of economic activity – which remains solid, with the November drop considered temporary by the CBC – and by the path of the Federal Reserve’s monetary policy and the behavior of the local currency,” he concluded.
