"Inflation was low thanks to a drop in Alaska flights and Caribbean cruises"., wrote an auditor while I was being interviewed on the radio to comment on the February CPI. While it is understood that it is a caricature and that it is not entirely false, I think it is important to explain, first, how the CPI is constructed, how the CPI is constructed and, secondly, how much of an impact some particular products have.

The CPI consists of 303 products and services representing the consumption habits of Chileans. Understanding that these habits are dynamic, the basket is renewed every five years and is constructed on the basis of the Household Budget Surveywhich is elaborated by the Central Bankwhich is then adjusted by taking into account information from the National Accounts (since there is under-declaration of some consumption, especially in alcoholic beverages and tobacco). For a product to be considered within the CPI basket, it must meet a series of methodological requirements, must meet a series of methodological requirementsThe two most relevant of these are that it must be included in household household expenditures of at least four of the five income quintiles of the population and that it represents at least four of the five income quintiles of the population. and that it represents at least 0.02% of the annual budget. This seems to me to be extremely relevant, because sometimes the impression is left that the basket represents only the consumption of a few, or of specific groups, which is clearly not the case.

Is the CPI basket my consumption basket or yours? Or yours? Probably not, which is not a bad thing, because it is not the task of this statistician to show whether or not my or your monthly expenditure increased, but that of an average Chilean. Some will spend more on food, others more on travel, others more on fuel, etc., which does not mean that the data is "lying". Moreover, if one wanted to, there is all the information available to be able to build one's own CPI. construct one's own CPIby changing the weights to ones that more closely resemble one's budget. In fact, this is done to build other underlying indexes or, as has been our case, to elaborate measurements on what happens with the basic basket, with goods in high demand, etc.

So, having made this clarification, we move on to the figure of discord. February's CPI rose 0.3% from Januarywhich was below expectations, which were up to 0.8%. However, this figure does not break the inflationary trend of recent months, as discussed.as has been mentioned. It is not necessary to dig very deep to find out the reasons for thisThe sum of the negative effects of package tours (-0.364 pp) and airline tickets (-0.181 pp) explain more than -0.5 pp of the final result. In other words, in a very rough calculation (and by no means a counterfactual), without these variations, the total index would have increased 0.7% m/m. In fact, when we look at the CPI without volatility, we realize that it just increased by 0.7% m/m, which brought it to 6.5% with respect to the same period of the previous year. Additionally,In addition, an indicator that has served us well in exemplifying these inflationary pressures is the diffusion indexwhich this time reached 64%. As in the previous month, it is the highest for any February since 2009.

If we add to the above cocktail the commodity price increases that have brought brought about, in part, by Russia's Russia's invasion of Ukrainethe situation does not improve substantially. In fact, just because of the oil price increase alone (up to US$120 (up to US$120) we have increased our December inflation forecast by 0.8 pp (to 7.0% YoY), to which further adjustments for both this and food prices could be added. For March, we project a 1.0% m/m increase, mainly due to the impact of Education and Food..

Therefore, although the figure may seem low, it is not what it appears to be.. As we have said on several occasions, it is necessary to carry out a more in-depth analysis conclusions as important as the ones we have tried to draw. Inflation has not subsided and requires all the efforts of our institutions to control it. of our institutions in order to be controlled, This is a task that not only falls to the Central Bank, but also to the recently assumed executive.

Nathan Pincheira 

Chief Economist of Fynsa