Fynsa
There is no end to the news regarding the most pressing economic issue for Chileans. The National Institute of Statistics (INE) reported that the CPI for March rose 1.1% compared to February—the highest increase of the year—which was, however, in line with our estimate and slightly above market forecasts and surveys. While the figure might surprise the uninitiated, we should note that March is typically characterized by high readings (just like September) because, for seasonal and methodological reasons, many price adjustments occur during this month.
It is for this reason, then, that we should not be surprised that the education category saw by far the largest increase, accounting for more than 70% of the total rise. Another factor that had a significant impact was rent, which, as the heaviest-weighted item in the basket, contributed nearly 0.1 percentage points to the overall change. The first increase does not concern us as much, since for methodological reasons (education is measured only once a year), this variation incorporates all the inflation seen during 2022, which would not be reflected in the coming months. However, the rent increase could have greater repercussions, as its inertia would continue to prevent a faster normalization of inflation.
On the downside, the transportation sector once again leads the declines, largely due to ongoing adjustments in fuel prices and the automotive market—one of the sectors hardest hit during the pandemic. In fact, over the past six months, new car sales have fallen by more than 7%, a figure similar to the decline seen in used car sales.
In any case, the trend in core inflation remains a cause for concern ; in our country, this index is calculated by excluding the most volatile goods and services. As a result, this indicator rose by 1.6% over the month, causing the year-over-year rate to increase from 10.7% to 10.8%. The reader may not find this particularly significant, but keep in mind that the aggregate index has fallen steadily in recent months and, in particular, from 11.9% to 11% in March.
It is this stagnation in inflation over the medium and long term, then, that has led the Central Bank to state that it would keep the rate at 11.25% for a longer period than it had previously forecast. In the Monetary Policy Report (IPoM) published this week, it noted precisely that, citing the additional challenges posed by inflation control. All things considered, it is quite likely that we will not see any changes to the TPM until at least the fourth quarter of 2023.
