Bloomberg News

Chilean Government Sees Reduced Pressure on Consumer Prices

June 02, 2011

(Updates with comment by finance minister in third paragraph, breakeven inflation in fifth paragraph.)

June 2 (Bloomberg) -- Chile’s inflation outlook has improved on easing food and fuel price pressures and higher lending costs, said Finance Minister Felipe Larrain.

The government’s fuel stabilization measures are working as pump prices decline this week while planned government budget cuts are also helping bring down estimates for consumer price rises, Larrain told reporters today in Santiago.

“Today we see a better scenario for inflation,” he said. “Inflation expectations are reflecting this and are falling.”

Chile’s central bank raised the benchmark rate at 11 of its last 12 monthly meetings to 5 percent in May as inflation expectations accelerated. The annual inflation rate fell to 3.2 percent in April from 3.4 percent in March.

One-year breakeven inflation, which reflects the view of average price increases, declined to 3.39 percent yesterday from 4.56 percent on March 1. Chile’s peso was little changed at 468.13 per U.S. dollar at 8:35 a.m. New York time today.

While Chile’s unemployment rate unexpectedly fell in the three months through April, salaried workers saw a 0.4 percent decline, according to a government report released May 31. That means the data is unlikely to place additional pressure on consumer prices, said Juan Pablo Castro, an economist at Banco Santander in Santiago.

The central bank may slow the rate of increases or pause, bank President Jose De Gregorio said May 20. The central bank’s next rate decision is expected June 14.

-- Editors: James Attwood, Richard Jarvie

To contact the reporter on this story: Randall Woods in Santiago at

To contact the editor responsible for this story: Joshua Goodman at

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