Key Points
— Chile’s CPI rose 1.0% in March — above the 0.8-0.9% market consensus — driven by gasoline prices jumping 8.2% and diesel surging 12.8% after the government ended the MEPCO fuel subsidy
— Annual inflation rose to 2.8% from 2.4% in February, reversing four months of decline that had taken it below the central bank’s 3% target for the first time in five years
— Analysts project April CPI at 1.4-1.6% as the full fuel shock lands, with year-end inflation now forecast at 4.2-4.9% — well above the 3% target and likely freezing any further rate cuts
Chile inflation in March 2026 marked the end of the country’s disinflation streak, as the fuel price shock from the Iran conflict and the Kast government’s subsidy removal hit consumers simultaneously — sending the monthly reading above expectations and forcing analysts to rewrite their year-end forecasts, INE, Bloomberg Línea, and Diario Financiero reported.
The National Statistics Institute reported Wednesday that the IPC rose 1.0% month-on-month in March, accumulating 1.4% for the year and 2.8% over twelve months. The result exceeded the 0.8-0.9% consensus and marks the largest monthly increase since the Iran conflict began disrupting global energy markets. Ten of the 13 IPC divisions rose, while only three declined.
The Fuel Effect — And Why April Will Be Worse
Transport drove the headline, rising 2.6% on the month. Gasoline prices jumped 8.2% and diesel climbed 12.8%, but even these sharp figures understate the full impact. Raw prices at the pump surged approximately 40% for gasoline and 50% for diesel during the last week of March alone — the INE’s averaging methodology, which blends all four weeks, smoothed the shock. The institute explicitly warned that if prices remain at late-March levels, April’s reading will capture the remaining upside that March’s index missed.
The fuel spike reflects two simultaneous forces. The Kast government ended the MEPCO fuel stabilization mechanism in late March, allowing international oil prices to pass through to consumers at full speed. That decision collided with Brent crude still trading near $93 — down from the $110+ peak during the Hormuz closure but still well above pre-war levels. The combined effect turned Chile from one of Latin America’s lowest-inflation economies into one facing a fuel-driven price acceleration that analysts say will persist through at least mid-year.
Beyond Fuel: Education and Food
Education costs rose 5.5% in March, reflecting the annual fee adjustment cycle. International airfares jumped 15.2%. In food, tomatoes surged 17.6% — a seasonal factor amplified by transport cost pressures. The breadth of the increase across divisions signals that the fuel shock is transmitting into second-round effects faster than the central bank’s models anticipated when it celebrated inflation falling below 3% in January.
Rate Cuts Frozen, Growth Outlook Cut
The inflation reversal effectively closes the door on further monetary easing. The Central Bank has held the policy rate at 4.5% since January and already cut its 2026 growth forecast to 1.5-2.5%, down from 2.0-3.0%. Financial operators surveyed by Diario Financiero now project inflation at 4.9% in twelve months, well above target, with a return to 3.2% not expected until 2028. Scotiabank estimates that fuel alone will contribute 1.1 percentage points to April’s CPI, with additional second-round effects from transport and food pushing the monthly reading into the 1.4-1.6% range. Coopeuch projects year-end inflation at 4.2%.
For President Kast, the inflation surge creates a political contradiction. His decision to end fuel subsidies was framed as fiscal discipline — eliminating a deficit left by the Boric government. But the timing placed the subsidy removal directly into the path of the Iran oil shock, producing a price increase that Chilean households are experiencing as a government choice rather than a global event. If the ceasefire holds and oil stabilizes below $95, Scotiabank expects fuel to begin subtracting from CPI by May. If it doesn’t, Chile faces the prospect of 5% inflation under a president who promised austerity and stability.