MercoPress. South Atlantic News Agency

June inflation in Chile reaches 0.9%, the highest since 1991

The National Statistics Institute (INE) revealed this week that Chile's Consumer Price Index increased 0.9% in June. That figure is nearly double the 0.5% monthly government projection, and it revived calls for higher interest rates to calm inflation worries.

The Consumer Price Index climbed by the largest amount for the month of June since 1991. According to the INE, the change is "due in grand part to dairy price increases, which alone have increased 0.22 percent." Additionally, upsurges in electricity, gas, and transportation costs spurred the high inflation rate. Economists warned that similar price increases could be on the near horizon. "In years past, low prices around the world helped to keep prices down here in Chile. But, this trend has reversed itself in the past few months," explained economic analyst Andres Passicot. "Whoever thinks that this 0.9% increase will only happen once might be in for a bad surprise. Inflationary pressures have been evident in the past few months." Passicot went on to say. In response to the higher inflation, economists expect the Chilean Central Bank to raise interest rates in order to curb spending and other inflationary pressures. According to a communiqué from the Santiago Chamber of Commerce, "it's almost certain that, when the Central Bank's board meets again, they will raise interest rates by at least 25 percentage points." That body's next meeting will take place July 12. In spite of analysts' ominous words, Treasury Minister Andres Velasco remained confident that Chile will have an overall inflation rate around 3% for 2007. "Let us put things into perspective. One should not dwell on one month's inflation rate, but rather the inflation rate of an extended period of time. The Central Bank has a 12 month goal of three percent. It is a figure that we are going to watch closely," he explained. Still, Agriculture Minister Alvaro Rojas cautioned consumers to expect to continue paying higher prices. "We are going to have to get used to paying a little bit more for the short or medium term," Rojas said. SOURCE: LA TERCERA and LA NACION By: Matt Malinowski (editor@santiagotimes.cl)