July CPI: Volatile Core, Calls for Cautious Policy

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M

Update

August 7, 2026 02:09 PM GMT

Chile Economics | Latin America

Morgan Stanley & Co. LLC

Nicolas Eterovic

Economist

July CPI: Volatile Core, Calls for

Cautious Policy

Morgan Stanley C.T.V.M. S.A.

Julia Lobato Barbosa

Economist

Key Takeaways

July CPI printed +0.09% m-o-m, in line with our forecast (+0.11%) and BBG

consensus (+0.10%) — but a clean headline masks two distinct stories.

Core goods ex food ran higher on Cyber-sale payback overshooting June's

discounts — a temporary, mechanical effect rather than a demand signal.

Core food surprised sharply higher (+1.08% m-o-m), but bread behaved almost

exactly in line with the 2010–2019 historical average we'd assumed.

The main surprise was driven by soft drinks instead, where we cannot yet rule

out an FX-related component.

This does not resolve the BCCh's caution; core and services persistence is

consistent with a Board that stays two-sided rather than closer to a policy shift.

July CPI came in at +0.09% m-o-m, essentially in line with our forecast (+0.11%)

and Bloomberg consensus (+0.10%). In annual terms, headline inflation declined 81

bp to 3.53% y-o-y from 4.34% in June, close to our 3.55% call, mostly reflecting base

effects. At face value this looks uneventful — but the in-line headline is the product

of two large, offsetting surprises in the composition.

Core inflation surprised meaningfully to the upside at +0.46% m-o-m (3.21% y-oy), above our +0.38% forecast, accelerating to +0.48% m-o-m SA — well above

the ~0.25% pace consistent with stable 3% inflation. The core goods aggregate

(+0.64% m-o-m) splits into two different stories. Core goods ex food rose +0.45%

m-o-m (0.74% y-o-y), led by men's clothing (+5.8%, +3.1 bp) and home furnishings

(+3.3%, +2.7 bp), partly offset by new cars (-0.8%, -2.6 bp). This looks like

mechanical payback from June's Cyber-sale discounting overshooting the reversal

we'd modeled — temporary, not a demand signal.

Core food (non-volatile) was the more consequential surprise, at +1.08% m-o-m

(4.11% y-o-y) against our +0.52% forecast. Bread validated our historical-average

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