Chile Economics: May CPI: Mixed Core, But Still a Relief...

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Chile Economics: May CPI: Mixed Core, But Still a Relief...

UpdateMthrough aggressively. Unlike April, where energy explained most of the headline

print, May suggests that the direct energy shock is fading faster than anticipated.

Gasoline was largely absent from the main contributors, while liquid gas posted

only a modest increase. More importantly, food dynamics remained benign. Fruits

and vegetables declined sharply, volatile food remained contained, and core food

posted a large decline. Taken together, the data continue to provide little evidence

that higher fuel costs are feeding into broader food inflation.

May's print reinforces the message from April that the energy shock remains

largely a first-round phenomenon. The combination of weaker-than-expected

headline inflation, benign food dynamics, and limited evidence of second-round

effects suggests that underlying inflation pressures remain contained despite

elevated headline inflation. Goods ex food inflation was somewhat firmer, likely

reflecting seasonal pricing ahead of Cyber sales, while services remain the main

source of persistence.

From a policy perspective, this should provide some breathing space for the

BCCh. While the Board may interpret part of the food surprise as supply-driven and

therefore temporary, the broader message is that inflation has behaved better than

feared following the fuel shock. The absence of meaningful spillovers into food and

broader goods inflation reduces the urgency of a more hawkish response, even as

services inflation remains an area of attention. Looking ahead, the key question is

whether the remaining energy pass-through eventually feeds into food prices,

inflation expectations, and broader persistence. For now, the data continue to point