Latam Daily: Chile CPI and BCRP Macroeconomic Expectations Recap

• Chile: October CPI at 0.5% m/m (4.5% y/y) in line with our expectation

• Peru: Macroeconomic expectations reinforce the likelihood that the BCRP will keep its policy rate unchanged

CHILE: OCTOBER CPI AT 0.5% M/M (4.5% Y/Y) IN LINE WITH OUR EXPECTATION

Benign inflation composition does not reduce the likelihood of a 25bp policy rate hike in December

October CPI came in at 0.5% m/m, in line with our point forecast, although below both market consensus and UF forward pricing expectations (Bloomberg: 0.6%, FRW: 0.56%). Core inflation excluding volatile items (ex-volatiles) stood at 0.0% m/m, slightly below our 0.1% forecast, but almost entirely explained by the unprecedented 14.7% decline in the Internet connection item, which subtracted 0.11pp from core CPI and 0.07pp from headline CPI. We maintain our expectation of a policy rate increase at the December meeting.

The decline in inflation breadth was driven by Cyber-sensitive goods. As expected, goods diffusion declined relative to the previous month, reflecting discounts associated with the Cyber Monday event held in early October (charts 1 and 2). Based on our estimates, the contribution of these price declines to headline CPI was -0.09pp, smaller than in October last year (-0.15pp), partly due to fewer products posting price declines, but also because the declines were concentrated in items with a lower weight in the CPI basket.

October inflation was largely explained by volatile components, particularly fuels and fresh vegetables. The unexpected drop in Internet connection prices (-14.7%) pushed monthly core inflation down to zero, leaving headline inflation mainly determined by the expected increase in fuel prices (gasoline, diesel and LPG) and higher fresh vegetable prices, which have been affected by this year's weather conditions and are following a pattern similar to that observed in 2023.

Preliminarily, we forecast November CPI at 0.5% m/m (4.7% y/y), with another positive contribution from fuels. Next week, ENAP is set to announce further fuel price increases, which will be the only adjustment implemented this month, as the next fuel pricing decision will take place in December. We estimate another increase in gasoline prices of around CLP39/lt and a rise of around CLP90/lt in diesel prices, implying a CPI impact of roughly 0.2pp. At the same time, we expect part of the negative contribution from goods prices associated with October's Cyber Monday discounts to reverse in November. Together with additional increases in food prices, these factors would explain close to 60% of the CPI increase we project for November.

Monetary policy implications. The somewhat benign nature of this inflation print, which was in line with our forecast, does not reduce the likelihood of a 25bp increase at the December monetary policy meeting. However, it does suggest less urgency for a subsequent hike in January. Following this release, the probability of bringing the policy rate to 5.0% appears higher at the March meeting. This does not materially alter our baseline scenario, which continues to incorporate a 25bp hike in December and an additional 25bp increase during Q1-27.

—Aníbal Alarcón

PERU: MACROECONOMIC EXPECTATIONS REINFORCE THE LIKELIHOOD THAT THE BCRP WILL KEEP ITS POLICY RATE UNCHANGED

The Central Reserve Bank of Peru (BCRP) recently released its October Survey of Macroeconomic Expectations. The results point to a deterioration in business confidence and some easing in 12-month inflation expectations.

Business expectations for the 3- and 12-month horizons deteriorated once again. In particular, 3-month expectations moved back into contractionary territory, amid the effects of the El Niño phenomenon, which is already affecting some economic sectors, including agriculture and fishing. However, this deterioration is likely to be temporary, as 12-month expectations remain in expansionary territory and above the 60-point mark.

As for 12-month inflation expectations, October marked the fourth consecutive month in which they remained above the BCRP’s target range (1%–3%), although they edged down from 3.09% to 3.05%. This figure does not yet reflect the impact of the rebound in headline inflation in October (5.25%), as the survey was conducted beforehand. Inflation expectations are therefore likely to increase again in November. However, they should return to levels close to 3.0% in December and could even fall below that level.

Against this backdrop, the likelihood that the BCRP will keep its policy rate unchanged at 4.25% on Thursday, November 12^th, has increased.

The survey also provided economic agents’ expectations for the main macroeconomic indicators:

• 2026 inflation expectations: The estimate increased from 4.1% to 4.5%, remaining below our current forecast of 4.8%. However, we see the risks as tilted toward a higher outcome.

• 2026 economic growth expectations: The estimate remained unchanged at 3.2%, in line with our forecast.

• End-2026 exchange rate expectations: The estimate increased from PEN 3.36 to PEN 3.39 per US dollar. Our current forecast remains at 3.35, a projection we have maintained since December 2025. However, we see the risks as tilted toward an exchange rate within a range of 3.35–3.40.

—Ricardo Avila