INE published the Consumer Price Index for the month of September. Surely you have already read that it increased 1.2% compared to August, which is the highest monthly variation of this indicator since June 2008. Thus, with respect to last year, the basket of 303 products exhibits an increase of 5.3%, the highest year-on-year increase since November 2014.

It seems to me that, regardless of the causes, this data is worrisome. You do not have to be an expert to understand that perhaps this is one of the consequences of economic phenomena that most affects the population. It is possible that we do not know much about Imacec, long term bonds, the Federal Reserve rate, but about inflation... we do know a lot. The generalized rise in prices immediately makes us poorer because, with our same income, we can buy fewer goods and services (both now and in the future), directly diminishing our well-being and that of our families. At a time when the covid 19 pandemic is in retreat, but its health and economic effects will take much longer to normalize, this factor is disturbing.

As it could not be otherwise, some people want to take the debate to the causes of this inflation (as if its consequences on people would be different), squeezing the most out of two or three factors that may justify the continuity of irresponsible public policies. It is absolutely true that part of this inflation is imported. The rise in the price of energy has been a relevant factor not only in Chile, but also in the world. Higher demand for crude oil as a result of the deconfinement processes 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 automobiles. If we look at the recently published CPI we can account for this: the cost of energy grew 1.0% over the previous month, accumulating 15.5% in the last year, while new and used cars, with respect to 2020, have risen 14% and 35%, respectively.

However, to ignore the local effects is to not want to talk about the elephant in the room. Since the beginning of the pandemic, fiscal policies and withdrawals from AFP funds have accumulated more than US$80 billion, a little more than the entire national budget for 2022 (still in bill). Additionally, the exchange rate has depreciated multilaterally and not only against the dollar as in other opportunities. This, as the Central Bank politely says, is due to idiosyncratic factors. It has been so much so that neither the liquidations of the Treasury (due to placements abroad and sales of sovereign funds) nor those of the AFPs (due to the three withdrawals of funds), nor the 125 bp increase in the TPM, have been able to reverse the situation. Am I cherry picking? Take a look: of the year-on-year variation of 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 show, with multidimensional causes. However, ignoring the local impact of increased household liquidity is an intellectual dishonesty that, at the end of the day, will end up making us poorer.

Nathan Pincheira 

Chief Economist, FYNSA