Chile’s inflation ended last year right on the central bank’s target of 3.0%, but changes to the basket used to measure consumer prices could push up inflation going forward.
The new weights for the consumer price index came into effect this year, and will favor some categories posting higher inflation readings.
Credit Suisse noted Thursday that there is an upward bias for inflation in Chile and forecasts a 3.5% gain this year.
Bank of America Merrill Lynch forecast, meanwhile, that inflation will be at or above 3.0% in 2014. It says that tax changes should have a greater impact with the new inflation basket, including on alcoholic beverages and on financial transaction services.
“All in all, we believe there are upside inflation risks in 2014 compared to our 3% forecast due to the tax reform, in spite of the expected deceleration of the economy,” Merrill said.
Chile’s economy is expected to have expanded about 4.0% last year, well down from the 5.6% gain posted in 2012. Less certain appears to be how Chile’s central bank will respond to upward pressures on inflation as economic growth weakens.
Credit Suisse forecasts the central bank will cut its monetary policy rate next week, despite the higher-than-expected inflation, “ahead of increased inflation uncertainty associated to the change in the base year in the consumer price index.”
The central bank cut its policy rate in October and November by 25 basis points each month to bring the rate to 4.5%. It paused in December.
wsj.com
The new weights for the consumer price index came into effect this year, and will favor some categories posting higher inflation readings.
Credit Suisse noted Thursday that there is an upward bias for inflation in Chile and forecasts a 3.5% gain this year.
Bank of America Merrill Lynch forecast, meanwhile, that inflation will be at or above 3.0% in 2014. It says that tax changes should have a greater impact with the new inflation basket, including on alcoholic beverages and on financial transaction services.
“All in all, we believe there are upside inflation risks in 2014 compared to our 3% forecast due to the tax reform, in spite of the expected deceleration of the economy,” Merrill said.
Chile’s economy is expected to have expanded about 4.0% last year, well down from the 5.6% gain posted in 2012. Less certain appears to be how Chile’s central bank will respond to upward pressures on inflation as economic growth weakens.
Credit Suisse forecasts the central bank will cut its monetary policy rate next week, despite the higher-than-expected inflation, “ahead of increased inflation uncertainty associated to the change in the base year in the consumer price index.”
The central bank cut its policy rate in October and November by 25 basis points each month to bring the rate to 4.5%. It paused in December.
wsj.com
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