20171114-法国巴黎银行-Chile__High_CPI_print_reaffirms_view_of_no_rate_cuts_6页_274kb

Chile: High CPI Print Reaffirms View of No Rate Cuts

Core Content Summary

The document provides an analysis of Chile's inflation data and its implications for the Central Bank of Chile (BCCh) monetary policy decisions. It highlights that the recent Consumer Price Index (CPI) data for October has reinforced the expectation that the BCCh will maintain the policy rate unchanged in the near term.

Key Findings

• October CPI Data:

  • The headline inflation rate rose to 0.6% month-over-month (m/m), exceeding the BNP Paribas forecast of 0.4% m/m and the consensus estimate of 0.3% m/m.
  • Annual inflation increased to 1.9% year-over-year (y/y).
  • Core inflation stood at 0.5% m/m, with an annual rate of 2.1% y/y, returning to BCCh's tolerance range of 2-4%.

• Deflation Concerns:

  • The unexpected rise in inflation helped to downplay deflation fears that were heightened by the previous month's low reading of -0.2% m/m.
  • Despite the low CPI in September, inflation expectations for the next twelve months declined, but the 1y/1y expectation remained aligned with the 3% official target.

• Monetary Policy Outlook:

  • The document expects BCCh to keep the policy rate unchanged at the upcoming monetary policy meeting.
  • No rate cuts are anticipated this year or until Q2 2018.
  • A gradual rate normalization cycle is forecast to begin around the middle of next year, with the policy rate expected to reach 3.50% by end-2018, up 100 basis points (bp) from the current 2.50%.

• CPI Components Analysis:

  • Ten out of twelve CPI components contributed positively to headline inflation in October.
  • The housing and food components were the main drivers, accounting for 60% of the monthly increase.
  • Housing prices were mainly influenced by electricity tariffs, while food prices rose across the board.
  • ** Tradable inflation** was at 0.9% m/m, while non-tradable inflation was more modest at 0.3% m/m.

• Non-tradable Inflation Trends:

  • Non-tradable inflation is likely to accelerate due to the rising pace of nominal wages and improving economic conditions.
  • Non-tradable prices remain slightly above the official 3% target.

Charts Mentioned

• Chart 1: Headline and core inflation (y/y)
• Chart 2: Tradable and non-tradable prices (y/y)

Legal Disclaimer

• This document is non-independent research and may be subject to conflicts of interest due to its interaction with sales and trading teams.
• It is a marketing communication and not investment research.
• It is intended for Professional Clients and Eligible Counterparties as defined by MiFID and other relevant regulations.
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Conclusion

The October CPI data in Chile has reinforced the view that the BCCh will not cut interest rates in the near future. While headline inflation rose above expectations, core inflation has returned to the BCCh's target range. The non-tradable sector is expected to drive inflationary pressures in the coming quarters, and the policy rate is anticipated to normalize gradually starting mid-2018.