The INE published the Consumer Price Index for September. You have probably already read that it rose 1.2% compared to August, which is the highest monthly variation this indicator has seen since June 2008. Thus, compared to last year, the basket of 303 products shows an increase of 5.3%, the largest year-on-year increase since November 2014.

I believe that, regardless of the causes, this data is concerning. You don't have to be an expert to understand that this may be one of the consequences of economic phenomena that most affects the population. We may not know much about Imacec, long-term bonds, or the Federal Reserve rate, but when it comes to inflation... boy, do we know. The general rise in prices immediately makes us poorer because, with the same income, we can purchase fewer goods and services (both now and in the future), directly reducing our well-being and that of our families. At a time when the COVID-19 pandemic is receding, but its health and economic effects will take much longer to normalize, this factor is disturbing.

Unsurprisingly, some want to shift the debate to the causes of this inflation (as if its consequences on people were going to be any different), squeezing the most out of two or three factors that could justify the continuation of irresponsible public policies. It is absolutely true that part of this inflation is imported. The rise in energy prices has been a significant factor not only in Chile but also worldwide. Increased demand for crude oil as a result of the lifting of lockdown measures in developed economies, together with somewhat harsher winters in the northern hemisphere, have pushed the price of a barrel of oil above US$80. In addition, supply chains are far from normalizing, which continues to put pressure on the price of some products, such as cars. If we look at the recently published CPI, we can see this: the cost of energy rose 1.0% compared to the previous month, accumulating 15.5% in the last year, while new and used cars, compared to 2020, have risen 14% and 35%, respectively.

However, ignoring local effects is like not wanting to talk about the elephant in the room. Since the beginning of the pandemic, fiscal policies and withdrawals from the AFP funds have accumulated more than US$80 billion, slightly more than the entire national budget for 2022 (still in draft form). In addition, the exchange rate has depreciated multilaterally and not only against the dollar as on other occasions. The above, as the Central Bank politely puts it, is due to idiosyncratic factors. It has been so much so that neither the Treasury's liquidations (from placements abroad and sales of sovereign funds) nor those of the AFPs (from the three fund withdrawals), nor the 125 bp rise in the MPR, have been able to reverse the situation. Am I cherry picking? Consider this: of the year-on-year variation in the CPI, 35% has been caused by services (more linked to local factors), versus 24% by goods (more linked to external factors).

Therefore, inflation is a more complex phenomenon than some try to portray, with multidimensional causes. However, ignoring the local impact of increased household liquidity is intellectual dishonesty that, at the end of the day, will end up making us poorer.

Nathan Pincheira 

Chief Economist at FYNSA