Chile Inflation Febuary 2008

Chile's inflation rate rose to the highest level since 1996 in February, raising expectations that policy makers will increase lending rates to a six-year high when they meet next week. Consumer prices rose 8.1 percent in the year through February, up from 7.5 percent in January, the National Statistics Institute said today. Consumer prices rose in the month from Januaryt by 0.4 percent.



The annual inflation rate has tripled from 2.7 percent last February as the worst drought in over a century devastated crops and gas shortages and low reservoir levels forced generators to burn more expensive fuel. The cost of electricity in Chile surged 20 percent in the month and prices for fresh fruit and vegetables soared.


Prices of tomatoes rose 20 percent while those for potatoes climbed 19 percent in February. On average, fruit and vegetables rose 3.5 percent.

The peso has gained 11 percent against the dollar, and it appears that traders are buying the currency - which climbed 1.4 percent to 448.00 pesos per dollar at 10:16 a.m. New York time yesterday, its highest level since trading at 445.30 on Feb. 20, 1998. - on expectations the central bank will raise the benchmark rate, now at 6.25 percent, for the third time in four months on March 13.

At the same time economic growth is slowing visibly, with the economic activity index increasing only 3.4 percent year on year in January, down from the high of 8.26% hit in March 2007.