Chile Inflation at a 13 year high

In the month of May, inflation in Chile has exceeded analysts predictions and is now running at a 13 year high.

As a result, speculation surrounding an increase in interest rates is now rife as the central bank vice president, Jorge Desormeaux, had warned previously that the bank will increase interest rates if oil prices do not fall in a period of rising prices, when compared to May 2007 consumer prices have increased by 8.9 percent.

Policymakers have been considering interest rate rises, although there has been a five month period of deliberation. They are meeting on June 10th and some analysts are predicting that a change in rates is very likely, with chances quoted at around 80 percent.

So far this month, the bank has held the target overnight lending rate at 6.25 percent, which is the fourth straight month of static interest rates.

It is clear that the central bank should be worried by the state of inflation as the Chilean peso gained 1.2 percent, and is now trading at 482.90 against the dollar.

The economy expanded 4.8 percent last month compared to last year and the good news is that this is 1.3 percent above economists estimates.

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