Chilean Central Bank: Inflation will reach 11% in 2022

RIO DE JANEIRO, BRAZIL – Inflation in Chile will close this year with a rise of 11%, while the benchmark interest rate will reach 9.5% this July, according to a Central Bank survey of economic operators published on Tuesday.

The experts consulted in the issuer’s Economic Expectations Survey (EEE) adjusted their previous projection of the Consumer Price Index (CPI) for 2022, which stood at 10%.

For this year, the EEE estimates a gross domestic product (GDP) growth of 1.8%, while for 2023, it forecasts between 0.5% growth to -1% recession, similar to those of June.

Concerning the exchange rate and the dollar’s runaway escalation, analysts maintain that in two months, the US currency will be around CLP 830, in 11 months, it will be around CLP 820, and in 23 months, it will be around CLP 802.

Chile has been immersed in a spiral unparalleled since the 1990s for several months, with a CPI that closed 2021 at 7.1%, its highest figure in 14 years.

The country has accumulated a 12.5% 12-month price increase, the highest level since 1994, which led the issuing entity to raise the reference rate by 75 points in June, from 8.25% to 9%, its highest value since 2001.

The strong inflation is compounded by the escalation of the dollar, reaching record highs for several days, surpassing CLP 1,000, and closing Monday above CLP 970, according to local operators.

At the same time, the government announced Monday, July 11, new benefits for 7.5 million of the country’s 19 million inhabitants, including the extension of an employment subsidy and a personal bonus of CLP 120,000 (US$119) for the country’s most vulnerable 60%.

According to analysts, the inflationary peak affecting Chile is mainly due to external causes, such as the rise in fuel prices due to the Russian military operation in Ukraine or the failures in the supply chains caused by the pandemic.

But they also point to some internal factors such as political uncertainty due to the constituent process the country is going through or some measures that triggered consumption in 2021 and “overheated” the economy to the point that the GDP grew by 11.7% – its largest expansion in four decades.

With information from EFE