MercoPress. South Atlantic News Agency

Iraq pushes Chilean inflation

Education and fuel prices pushed the March retail prices index in Chile to 1,2%, and the accumulated inflation of the last twelve months to 4,5%, the highest since 1991.

March is the month when the school year begins in South America. However if fuel and perishable food are not included in the index the twelve months index drops to 2,4%. Chilean Finance Minister Nicolás Eyzaguirre said that the high inflation index of March was not totally unexpected since it absorbed the impact of international oil prices and the uncertainty in the local exchange market previous to the beginning of the Iraq conflict. The US dollar in Santiago reached almost 760 pesos, but now has consistently dropped and stands in the range of 720/725 Chilean pesos. Nevertheless Mr. Eyzaguirre anticipated that the twelve months inflation will soon return to its target of 2 to 4% for 2003.

But the Chilean Commerce, Services and Tourism Chamber, CNC, is not so optimistic and estimates that the 2003 inflation will be above the government's upper 4% target, given the current international instability. CNC said the organization was surprised at the 1,2% March index since they were led to expect 0,8%, but understand that fuel and education prices had their impact. However given the current world scenario plus the length of the war and how Iraq evolves in the future CNC anticipates Chilean inflation in 2003 will be above 4%. "This could lead to monetary policy adjustments such as raising interest rates to contain inflation, which will hinder the still timid economic recovery", concludes CNC.