Chile Inflation December 2007

Chilean consumer prices climbed more than expected in December, boosting expectations that policy makers will raise interest rates next week to slow what is now the fastest annual inflation rate in almost 12 years. Consumer prices rose 0.5 percent in December, the government-run National Statistics Institute said yesterday in Santiago. The annual rate rose to 7.8 percent, the highest level since June 1996. The month on month rate of 0.5% however was down on November's 0.9% rise as fresh food prices dropped 0.8% on the month.



Housing costs, including basic services, and transportation both rose 1.4 percent from the previous month, following a 21 percent increase in long-distance bus fares and a 16 percent rise in the price of airline tickets. Core inflation, which strips out the prices of minus fresh fruit, vegetables and fuel, accelerated 0.9 percent in the month and 6.3 percent from December last year, the institute said.

The central bank voted unanimously last month to raise the benchmark interest rate by a quarter-point for the fourth time since July, citing an unexpected rise in inflation. Policy makers were concerned that faster inflation would spread across the economy and affect inflationary expectations, according to the minutes of the meeting released yesterday.

Chile's economy more than doubled dollar terms in the three years ending 2006 as surging demand for the country's exports stoked expansion of what is Latin America's fourth-largest economy.






Annual inflation has accelerated from 2.6 percent in 2006 to close out 2007 at a level that is almost double the central bank's target of 3 percent plus or minus 1 percentage point.




The bank's monetary policy council has pushed up the overnight rate to 6 percent from 5 percent last June - up from as low as 1.75 percent in September 2004 - as the economy and inflation have accelerated.


The peso strengthened for a third day on the back of the news, rising 0.1 percent to 495.72 per dollar at 12:51 p.m. New York time from 496.42 per dollar late yesterday.