Last month, prices in Chile were the bad news. This month, they are the good news.
In May, the cost of living rose just 0.2% from April. Every economist had braced for a bigger jump.
The reading came in under all of their forecasts. That is a rare clean miss to the low side.
A month earlier, prices had jumped 1.3% in just one month. That spike pushed yearly inflation up to 4%.
Inflation is just the pace at which prices rise. The bank wants it near 3%, so 4% set off alarms.
Think of it like a fever that finally breaks. The worst of the fuel shock may now be passing.
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The April pain came mostly from one place. Transport costs shot up 8% as fuel prices climbed.
The bank had warned this was coming. It expected prices to push near 4% in the spring.
May suggests that jump was a one-off, not a new trend. That is the read the bank was hoping for.
The rest of the economy looks soft, too. Jobs are getting harder to find, and growth slipped early this year.
Soft growth tends to cool prices on its own. That helps explain the mild May print.
Chile's bank has held its main rate at 4.5%. It meets again next week.
A soft inflation number hands it more room. Now it worries less that prices are running away.
That makes a steady hand easier to defend. It even cracks the door open to future cuts.
Lower rates would be welcome news for borrowers. They would also give the slowing economy a small push.
Strip out food and fuel and the picture is calmer. That core measure has stayed mild all year.
Chile leans hard on copper, its top export. Copper output fell last month, which weighs on growth.
Add a soft job market and a slow start to the year. Together, they give the bank cover to ease.
A friendlier rate path tends to help stocks and bonds. That is why one inflation print can move a whole market.
For Chileans, slower price gains help day to day. Paychecks stretch a bit further at the store.
A weaker peso is still a risk, though. It can make imported goods pricey again down the road.
Copper prices swing a lot too. Those swings keep the outlook cloudy from month to month.
One soft month is not a trend. The bank will want June to confirm the cooldown.
Fuel costs could still flare back up. For now, the surprise landed on the right side.
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