Consumer prices in Chile slip in February, paving way for rate cut

Consumer prices in South America's most advanced economy slipped in February, paving the way for further interest rate cuts according to one economist.

Headline consumer prices in Chile edged up by 0.2% month-on-month (consensus: 0.3%), sending the year-on-year rate down from 2.8% to 2.7%.

Declines in the cost of communication, clothing and housing drove the fall in the cost of living, offsetting rising prices for food and transport, according to Andres Abadia, senior international economist at Pantheon Macroeconomics.

At the 'core' level, which excludes food and energy, CPI was up by an identical percentage amount last month, but the year-on-year rate fell much more quickly, from 2.7% to 2.3%.

Services price inflation saw the biggest fall, retreating from an annualised pace of 3.5% in January to 2.9% for February. Tradeable goods inflation on the other hand slipped from 2.3% to 2.2%.

A recent surge in energy prices and a rebound in the peso were upside risks to CPI going forward, Abadia said, but he doubted that would check the downward pressures on prices from lower economic activity.

"These factors strengthen our view that the central bank has room for an additional rate cut next week."