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Santander Say Latest Inflation Read Should Be Taken With Caution

CHILE
  • Santander believe the decline in the CPI for February should be taken with caution. Although the data may affect future inflation due to its possible downward effect on expectations and due to the indexation clauses, the fact that core inflation remains high suggests that inflationary pressures, although they have moderated, remain tall.
  • In March, due to seasonal factors, we will once again see a high variation in the CPI, around 1%. Then, from April and May, the drop in inflation will be more evident, driven by the appreciation of the peso, the weakness of the economy and the decline in prices of raw materials at a global level.
  • The implications for monetary policy are unclear. Although the drop in prices brings inflation closer to the Central Bank's goal, it is difficult to guess whether convergence will occur faster than previously contemplated, given the high underlying figures.
  • For this reason, it is probable that the Council will remain in a position of caution, seeking to gather more information to start the process of rate cuts, which could take place around the middle of the year.
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