Chile’s inflation likely decelerated in April, full year headline inflation to reach 4.2 pct

Chile’s inflation in January had accelerated to 4.8% y/y from December’s 4.4% y/y. This was mainly because of certain alterations in government administrative charges. However, inflation slowed slightly in February to 4.5% y/y. It is likely to further decelerate to 4.2% y/y in April, according to Societe Generale.

“We also see core inflation moderating slightly to 0.3% mom (0.5% mom previously). This is consistent with our inflation forecast for 2016. We currently forecast 2016 headline inflation at 4.2%”, added Societe Generale.

In the mean time, the current risk on the upside to the near-term forecast regarding the considerable pass-through from currency depreciation and the strong labor market is receding slowly. Chile’s central bank had also lowered its inflation outlook for 2016 in April. It stated that the currency was unlikely to continue to depreciate at the same rate.

Moreover, a lack of growth momentum is expected to ultimate ease the labor market that will subsequently slow wage growth and inflation, noted Societe Generale. The BCCh had mentioned last month that inflation continues to be high and is likely to remain more than 4% for certain months.