Monetary Tightening Back On The Agenda

Consumer price inflation reached its highest level in 14 years, growing by 8.9% y-o-y in May on the back of rising food prices and record high global energy costs. Food and housing and utility prices contributed some 5.3 percentage points (pp) and 2.4pp to the May headline inflation figure, respectively. While we are keeping to our 2008 inflation forecast at 5.2% for now, we caution that the risks are heavily weighted to the upside. Indeed, we now expect two 25bps interest rate hikes this year, which would bring Chilean interest rates to 6.75%.

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