Fynsa
September, month of Fiestas Patrias. Asado and anticuchos, chicha and empanadas. Chilean salad, boiled potatoes, trips outside the capital and hellish tacos. Cueca and... price hikes. Or, well, that's what we were used to. Depending on the basket and the junction, the CPI for the ninth month of the year usually increases between 0.5% and 0.6% over the previous period. In fact, during 2023 we observed a monthly increase of 0.7%.
However, something happened this time. The country's main inflation indicator showed an increase of only 0.1% during September, which was below our expectations (0.3% m/m) and those of the market (0.3% - 0.4% m/m). It is true that - for different reasons - a below-normal variation was already expected, but not of this amount.
Fuel price declines were to play an important role in the lower estimates, but this should have been more than eclipsed by other seasonal increases within the same division and, of course, by aggregate food increases. But, to the surprise of many, this did not happen.
What would you say if I told you that, during the month, the price of meat and vegetables fell? You will probably find it hard to believe, but that is indeed what happened. The protagonists of the roast showed a drop of 1.2%, which is unusual but not completely unprecedented. Shall I tell you something else? We had already noticed a surprising increase in these products during August, which could speak of certain "anticipated" increases, somewhat reducing this unusual behavior.
Still, the vegetable thing does surprise, with a 2.4% drop, the highest since the disaggregated CPI series has been comparable and only the second negative record for a September (the previous one was 2017). We would estimate a softer food division, but not at this level.
However, the year-on-year variation in the spliced series (the one used for readjustments, UF and other similar items) went from 4.7% to 4.1%, while for the benchmark series it went from 4.6% to 4.0%.
However, it cannot all be good news. As we already knew, October will see the second significant increase in electricity tariffs for regulated customers, which -according to our projections- would reach more or less 17% (averaged among different distributors). This increase alone would have an impact of 0.4 pp.
If we add to the above some rebounds we have seen in the food division, precisely in the products mentioned above, among others, we have an additional 0.4 pp, so that the inflationary estimate for the tenth month of 2024 is 0.8%. With this, both the referential and the spliced series would rise to 4.5% in year-on-year terms. This should not be of major concern, considering the nature of the increases.
For all these reasons, the monetary policy strategy should also remain unchanged. The cycle of cuts will continue, at a less aggressive pace than in the past, with 25 bp cuts in October and December. Thus, the TPM would close the year at 5.00%.
