Chile: Deeper Deflation than Expected
Nader Nazmi - Market Economics
Latam Macro Snapshot | 08 May 2013 14:04 |
Consumer prices declined 0.5% m/m in April. The monthly decline exceeded the 0.1% m/m drop that the consensus and we had anticipated. The main difference was a 2.0% m/m decline in transportation prices, which subtracted 0.4pp from headline inflation. The decline in transportation prices was driven by a 13.2% m/m drop in bus fares due to holiday-related factors.
Core CPI inflation (IPCX, excluding fruits and vegetables) declined 0.35 m/m in April, reflecting falling prices for transportation and recreation. The year-on-year measure of IPCX core inflation fell to 1.2% y/y from a previous reading of 1.3% y/y and a 2.6% y/y print a year ago. The BCCh's preferred measure of core (IPCX1, IPCX less regulated prices) declined 0.1% m/m, resulting in annual inflation of 1.6% y/y. IPCX and IPCX1 have increased by only 0.2% and 0.6%, respectively, in the first four months of the year.
The largest positive contributions to inflation came from rising prices for health services, which increased 1.3% m/m and added 0.07pp to headline inflation. Food price inflation was in check at 0.2% m/m.
The year-on-year measure of headline inflation declined from 1.5% y/y in March to 1.0% y/y in April, sinking further below the 2.0% floor of the IT range. While at this time we continue to expect a steady policy rate this year, April inflation data together with recent weakness in activity indicators increase the odds of rate cuts later in the year, in our view.
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