Chile’s consumer prices rose more than economists had predicted in April, with the inflation rate touching the strongest point in five years and overshooting the target rate after the peso plunged while the central bank loosened its monetary policy.
Inflation rate surged to 4.3 percent from 3.5 percent in March, reported the National Statistics Institute on Thursday. This exceeded the average estimate of 3.9 percent in a Bloomberg survey of 13 economists. The last time inflation exceeded the target rate was in February 2012, when prices rose 0.6 percent.
Inflation has surged from October’s 1.5 percent owing to the weakening peso which pushed up the cost of imports. The peso has plunged 8.2 percent versus the greenback in the last six month, making it the second-worst performer of all the main emerging-economy currencies monitored by the Bloomberg, with the other being the Argentine peso.
The central bank has slashed interest rates 4 times over the last seven months in order to stimulate growth of an economy that is expanding at the weakest rate since the 2009 financial recession, despite inflation growth. The central bank held a meeting on April 17 where it said that rates could be cut further. Unemployment rate has risen and growth slowed down since then.
The central bank is expected to slash the target rate to 3.75 percent next week, based on the bank’s survey of 37 investors and traders. Core prices, which are adjusted for volatile food and fuel, surged 0.8 percent in April, reported the statistics institute. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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