MercoPress. South Atlantic News Agency

June inflation in Chile is the highest in 17 years: 1.5%

Chile's Consumer Prices Index rose 1.5% in June accumulating 4.3% in the first half of the year according to the latest release from the country's Statistics Office. This is the highest June inflation since June 1991 (1.8%) and the highest monthly since October 1993 (2.6%).

The June 1.5% means Chile's inflation for the 12 months ending in June soared to 9.5%, overshadowing the 8.9% of the 12-month period through May, which had been the highest level in over a decade. Chile's stock market fell for the sixth consecutive session accumulating a loss of 10.3% while the peso rose as investors bet that the central bank will increase its benchmark interest rate. The US dollar fell from 520 to 509 pesos. The items which experienced the highest price increases are Transport, 3.6%; Food, 2.3% and Others, 1.6%. Finance minister Andres Velasco admitted "we have an inflation problem; the numbers are not encouraging because they hit people's pockets, and particularly those of those who have less, but we are going to win the battle against inflation". Interior Minister Edmundo Perez Yoma told reporters the government is "extraordinarily worried". Chile's core CPI inflation index, which excludes fuels and fresh fruits and vegetables, rose 0.8% in June. In May core inflation was 0.7% which means that the underlying inflation is moving at an annual 8.7%. Chile's central bank last month surprised investors by raising its benchmark interest rate by a half percentage point to 6.75% in a bid to curb inflation. Chilean Central Bank President Jose De Gregorio said "inflation was the Chilean economy's biggest problem", and did not rule out further increases in the country's benchmark interest rate despite the rise in June. Inflation is running well above the central bank's 12 to 24 month inflation target of 3% with a variance range of plus or minus 1 percent. Chile's annual inflation rate in 2007 surged to 7.8% after clocking an on-target rate of 2.6% in 2006.