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Inflation in Chile in November - Signs of Relative Stability

December 6, 2024 (Investorideas.com Newswire) Investorideas.com, a go-to platform for big investing ideas releases market commentary from Quasar Elizundia, Expert Research Strategist at Pepperstone.

"The recent publication of the Consumer Price Index (CPI) in Chile for November 2024 revealed mixed results, highlighting both progress in controlling inflation and persistent challenges for the economy. With a 0.2% monthly increase and an annual rate of 4.2%, the data confirms a moderation in inflation, supported by declines in food and non-alcoholic beverages. However, some sectors, such as household equipment and communication, showed increases, reflecting heterogeneous sectoral dynamics.

Despite an uptick in core inflation (+0.5% monthly), the overall inflation outlook appears more stable. This balance suggests that the recent interest rate cuts by the Central Bank of Chile have not compromised price control, bolstering confidence in monetary policy. Nevertheless, an annual inflation rate of 4.2% remains significant and above the central bank's target, which could continue to erode purchasing power in Chile and impact the dynamism of domestic consumption.

In the foreign exchange market, the Chilean peso has shown volatility against the U.S. dollar, influenced by both internal and external factors. The strong labor data in the U.S. has increased the likelihood that the Federal Reserve will proceed with a 25-basis-point cut in its December meeting. However, these figures could also reinforce the notion of less need for additional cuts in the future, likely supporting the dollar and potentially limiting the recovery margin for the Chilean peso.

Looking ahead, markets will closely monitor the Chilean trade balance and the next decision by the Central Bank. Weak foreign trade data or further rate cuts could increase pressure on the local currency."

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