Chile inflation overshoots forecasts, raising doubts about rate-cut path
Prices in the world's largest copper producer were up 0.9% last month, INE said in a report. Economists polled by Reuters had expected an increase of 0.6%.
The annual inflation rate hit 4.3%, the agency added, up from 4.1% in the previous month and the central bank's target range of 2% to 4%.
Policymakers at the bank cut the benchmark interest rate by 25 basis points to 4.75% last week, but said future moves would depend on the evolution of the macroeconomic scenario and its implications for inflation's convergence to its target.
Chile's central bank lowered borrowing costs by a total 625 basis points between July 2023 and December 2024, but had since kept them unchanged as it urged caution given price pressures.
The latest inflation figures, Barclays economists said in a note to clients, reflect "consistently stronger" economic activity and should limit the central bank's willingness to lower borrowing costs again this year.
Scotiabank economists, meanwhile, said that "monetary policy has no room for cuts" in the face of consecutive surprises in core inflation and an acceleration in non-mining gross domestic product.
The monthly consumer price rise in July, according to INE, was driven mainly by higher costs of housing amid higher electricity prices. Prices of food and non-alcoholic beverages also rose.
The only group of the 13 surveyed that posted a price decrease was insurance and financial services, the agency noted.
The higher-than-expected figure followed a drop of 0.4% drop in June, which at the time undershot market forecasts.
Despite the surprise on the upside, some market watchers still believe a fresh interest rate cut is in play at the central bank's next meeting on September 9.
"This single report is not enough to change our forecast for a new 25-basis-point policy rate cut in September," JPMorgan said. "Although it does make such a move contingent on the August consumer price index report."
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