Concerns about the recent strength of inflation in Chile are partly overdone given that it has been elevated by tax hikes which will unwind over the next year. But a relatively buoyant labour market and limited economic slack are reasons to still be wary of inflation pressures persisting over the medium term. While we still expect monetary policy to remain supportive, we have now pencilled in a modest 50bp of interest rate hikes to 3.50% in the first half of next year.
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