Inflation in Chile has moderated its pace in July, providing a respite for a country that four months ago was still dealing with the effects of one of the most unpopular economic decisions of José Antonio Kast’s government: not activating the mechanism that cushioned fuel price increases and passing the hikes on to Chileans’ pockets at the end of March. The Consumer Price Index (CPI) recorded a monthly variation of 0.1% and an annual rate of 3.5%, according to data released this Friday by the National Institute of Statistics (INE).
Accumulated inflation so far in 2026 stands at 2.9%. The figures are in line with economists’ projections, which ranged between 0.1% and 0.5%, and show the annual CPI approaching the 3% target of the Central Bank of Chile, led by Rosanna Costa, which due to inflationary risks, especially those arising from the war in the Middle East, has kept the interest rate at 4.50% since December 2025.
According to an INE bulletin, food and non-alcoholic beverages, housing, and basic services were the sectors with the largest increases last month. But these rises were offset by a monthly drop of 3.5% in transportation costs. The agency explained in a statement that this decline was mainly due to a fall in fuels for personal vehicles, which dropped 9.2% in July and subtracted 0.396 percentage points from the overall index. Within that category, the 8.5% decrease in gasoline prices stood out, with an impact of -0.317 points, and which has already accumulated a 16.5% decline over the past twelve months. Diesel, meanwhile, fell 13.5% monthly and totals a 22.9% decrease so far this year. This trend was joined by passenger air transport, which recorded a 9.4% drop last month.
Daniel Mas, co-minister of Economy and Mining, said that, as a government, he received the indicator “positively,” which is at the lower end of market estimates. “This shows that the economy is heading towards stability. It is true that the sharp drop in fuel prices significantly eased the index. However, we look at this with our feet on the ground and with empathy: we know perfectly well that increases in electricity bills and some food items continue to tighten Chileans’ household budgets. That is why we are not satisfied,” he wrote on his X account, while promising that the right-wing administration will continue pushing its growth and investment agenda.
The government celebrates the data after the Senate cleared the last pending article of Kast’s mega-reform earlier this week. Only three presidential vetoes and the opposition’s requests to the Constitutional Court against some of its provisions remain to be resolved.
The relief in the cost of living is also known just days after it was revealed that the Chilean economy rebounded in June, after five consecutive months of contraction.
However, the outlook is not fully optimistic, as it was also reported a few days ago that unemployment remains at 9.4%, its highest level in five years. Added to this is that the Donald Trump administration, which the La Moneda Palace considers one of its major trade allies, has included Chile in its latest tariff round, applying the highest rate, 12.5%, to several of its shipments to the United States.