UPDATE 3-Chile January inflation renews climb after flat December

Fri Feb 8, 2013 8:48am EST

* January CPI rises 0.2 percent, market expected no change
    * Chile CPI unchanged in December, fell 0.5 pct in November
    * Transport, housing, water, electricity, fuel prices rise
    * Air fares, financial services costs fall markedly
    * CPI rise in 12 months to January below central bank target


    By Anthony Esposito and Moises Avila
    SANTIAGO, Feb 8 (Reuters) - Chile's consumer price index
posted a 0.2 percent rise in January, defying expectations for
no change, as higher housing, water, electricity and fuel costs
more than offset a pronounced fall in air fares and financial
services, the government said on Friday.
    Chile's CPI was unchanged in December following
a 0.5 percent fall in November and a 0.6 percent rise in
October.
    "In January, nine of the 12 divisions that make up the CPI
basket posted increases in their indexes, while three posted
negative variations," the government's INE statistics agency
said in its inflation report.
     Among categories which fell markedly in price in January 
in a sector called diverse goods and services were financial
service costs, which declined 6.4 percent, due to a cut in taxes
levied on credit, INE said. Air fares fell 11 percent.
    Prices also fell for clothes and footwear, used cars,
computers and liquefied gas.
     Inflation in the 12 months to January was 1.6 percent,
remaining well below the central bank's estimate for a 2.9
percent annual CPI rate by year-end. Chile's CPI rose 1.5
percent in 2012.
    "We believe that an important part of the (CPI's) variation
in January should be transitory and will correct in the month of
February ... We have a preliminary forecast of a -0.1 percent
CPI for February," brokerage IM Trust said in a note to clients.
     Core inflation was 0.1 percent in January. Core CPI in the
12 months to January was 1.4 pct. 
   
    Elsewhere in the region, Mexico's annual inflation rate
cooled for the fourth month in a row in January to its lowest in
more than a year but the higher-than-expected reading weakened
bets on an imminent interest rate cut. 
    Inflation in Brazil rose faster than expected in the month
to mid-January, inching dangerously close to the ceiling of the
central bank's official target range though probably not enough
to force the bank to raise interest rates from a record low.
 
    Chile's central bank has kept rates steady since a surprise
cut in January 2012 as it weighs external risks against a
buoyant domestic economy.
    Thanks to robust domestic demand and investment, Chile's
small, export-dependent economy has mostly fared better than
expected despite slowing demand from top trade partner China and
fallout from the euro zone crisis. 
    The bank is expected to keep the key interest rate
 steady at the current 5.0 percent at its meeting on
Thursday, but then hike it to 5.25 percent in 12 months, the
bank's fortnightly poll of traders showed last month. 
    "We think this (CPI) result could put pressure on the bank
to discuss the option of a 25 basis point rate hike at its next
rate-setting meeting, though we rule out a hike actually
happening," Banchile Inversiones said in a note to clients.    
   The Andean country's economy is believed to have expanded
roughly 5.5 percent last year, according to government
projections.
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