Chile’s Consumer Price Index increased unexpectedly last month by more than analysts forecasted, increasing the odds that the Central Bank of Chile will raise the refinancing interest rate on the next week’s meeting to fight the record breaking high inflation.
Consumer prices rose 0.5% in December after 0.8% growth in November, the National Statistics Institute‘s report showed yesterday. The December’s increase appeared to be higher than the majority of the market analysts expected. Thus the annual inflation rate is now at its highest level since 1996 – 7.8%.
Last month Chilean central bank monetary policy meeting produced a strong decision to increase the interest rate by 0.25%. As the consumer inflation fails to meet the Chilean government’s target, central bank will have to continue a credit tightening policy and move the rates beyond the 6.00% mark.
While Chilean economy was showing a very strong growth during 2003-2006 period, recent pessimistic developments in the global economy cause a little slowdown for Chile. Raising the interest rate in such circumstances can lead to a further slowdown of this export-orientated economy.
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