Chile's consumer price index fell 0.8 percent in January, the biggest drop for the month since 1943 as prices slumped for fuel and clothing, data showed on Friday, boosting expectations for an aggressive interest rate cut. The January fall was greater than the median forecast of 11 economists polled by Reuters for a fall of 0.4 percent.
It follows a deeper-than-expected 1.2 percent fall in December - in turn the biggest prices drop for that month for 42 years. The January fall brings 12-month inflation down to 6.3 percent, compared to 7.1 percent for the 12 months to December, the National Statistics Institute said.
Core CPI, which strips out fuel, fresh fruit and vegetables, fell 1.8 percent in January, but was up 6.2 percent for the 12 months to January. "This means the central bank is going to have to make an aggressive rate cut (this month)," said Francisca Lira, an economist with BBVA in Santiago. "The most surprising was non-core inflation, as a result of clothing sales," she added.
"There are always clearance sales in January, but this year, as a result of the international crisis, the cut was much faster and sharper because retailers were caught by surprise with a lot of extra stock and they had to sell more." Transport prices fell 1.7 percent during the month, while clothing and footwear prices fell 10.5 percent, INE said.