Chile’s Consumer Price Index (CPI) revision and the dollar’s rapid fall prompt analysts to advocate for inflationary precautions.
The end of last year saw the National Institute of Statistics introduce an updated CPI basket, superseding its 2018 predecessor, with a focus on exchange rate-sensitive items.
This revision aligns with the Chilean peso’s status as the weakest global currency in early 2024.
Propela Inversiones, a financial advisory firm, sees the increased cost of imports as a reason to maintain indexed assets.
“Predicting and backtesting become more challenging with the new basket,” Rodolfo Friz, a Santiago-based partner, explained.
The impact of exchange rate shifts on prices is yet unclear, making UF bonds a prudent choice for guarding against unexpected inflation.
The basket’s refresh reduces items from 303 to 283, emphasizing costs like rent, dining out, new vehicles, and fuel, which are notably affected by exchange rates.
Discrepancies have emerged between the inflation expectations reflected by derivatives and some private analysts’ predictions.
For example, the one-year inflation breakeven stood at 2.49%, with the two-year rate at 2.74%. UF forwards predict a 12-month inflation rate of 2.49%.
LarrainVial predicts inflation surpassing 3% due to increased exposure of goods to currency depreciation, communicated to clients on February 16.
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