Chile Inflation Accelerates on Food, Transportation

By Sebastian Boyd and Nathan Gill

     Oct. 3, 2008 (Bloomberg) — Chilean consumer prices rose more than forecast by economists last month, led by electricity and food, boosting expectations that the central bank will raise interest rates for a fifth month next week.
     Inflation accelerated 1.1 percent in September, compared with 0.9 percent a month earlier, the National Statistics Institute said today. Inflation was faster than the median forecast of 0.9 percent in a Bloomberg survey of 22 economists.
     Today’s consumer price report may increase the likelihood that Chile’s central bank will raise interest rates for a fifth consecutive month next week to bring down an annual inflation rate that’s triple the bank’s target. After four straight half-point increases, policy makers may slow that pace next week in response to the global credit crisis.
     “The bank is set to hike rates again next week, though given the global dislocations it’s likely to ease the tightening pace to 25 basis points from 50 basis points,” Morgan Stanley economist Luis Arcentales wrote in a note to clients today.
     Consumer prices in the 12 months through September rose 9.2 percent, down from 9.3 percent in the year through August, the institute said. The annual rate was higher than the 9 percent median forecast of 17 economists in a Bloomberg survey.
     Electricity rose 5.8 percent in September, cigarettes rose 4.5 percent, strawberries are up 32 percent from a month earlier and pumpkin, a staple food in Chile, rose 26.6 percent, the National Statistics Institute said.
Wages, `Events’
     The government’s fight to lower inflation may be helped by slow wage growth as salaries rose at a slower pace than consumer prices. Salaries rose 0.4 percent, in August, up 8.2 in the 12 months to August, the institute reported.
     “One bright side is wages,” Duarte said. “They came in far below what would have been necessary to keep up in inflation so wages remain in substantially negative real territory. That’s a good sign for the central bank,” he said.
     Bank President Jose De Gregorio today said that the country’s inflation rate may slow because of the global financial crisis and that policy maker will weigh the effects of credit turmoil when they meet next week.
     “The central scenario doesn’t necessarily change, what happens is that it is more uncertain,” said De Gregorio. “And that is precisely why we have to keep observing how it develops and how events in global markets continue.”
     The peso fell 0.3 percent to 570.86 per dollar at 3:46 p.m. New York time from 569.38 late yesterday when the peso touched 574.55, its weakest since July 2005.

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