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April CPI Data Support Further Slowdown In BCCh Easing Pace

CHILE
  • The larger-than-expected 0.5% m/m increase in consumer prices in April lifted the central bank’s measure of headline inflation to 3.5% y/y, from 3.2%. It’s preferred measure of core inflation, core ex-volatile items, also rose by 0.5% m/m, which brought the annual rate there down to 3.5% y/y, from 3.7%. Core goods prices rose by a larger 0.7% m/m, which some analysts attribute to pass-through from earlier FX weakness, while core services prices rose by 0.4% m/m.
  • USDCLP is trading moderately higher today but did not move much on these data, which look to confirm a further slowdown in the pace of interest rate cuts later this month. A further 1.2% decline in copper prices today looks to be weighing slightly on the peso.
  • Goldman Sachs note that non-core energy prices rose 1.9% m/m in April, with fuel prices up by 3.2% m/m. However, they believe that the recent fall in oil prices and CLP appreciation could ease prices pressures ahead. They expect BCCh to continue with its easing cycle, albeit with caution. Meanwhile, Natixis expect BCCh to slow the pace of rate cuts to 50bp or even 25bp this month, due to the increase in tradeable/goods inflation and more cautious Fed stance.
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