(Bloomberg) -- Chilean consumer prices rose more than three times as fast as analysts expected in November, surprising investors ahead of the central bank’s final monetary policy meeting of the year. Swap rates and the peso soared in response.

Prices climbed 0.7% in the month, above the 0.2% median estimate of analysts surveyed by Bloomberg. While annual inflation slowed to 4.8%, it also exceeded the 4.2% forecast, the national statistics institute reported Thursday. Chile’s central bank targets cost-of-living increases at 3%.

“This is a big surprise, as leading indicators and survey data pointed to a modest month-to-month gain in November,” Andres Abadia, chief Latin America economist at Pantheon Macroeconomics, wrote in a note. 

The reading gives policymakers pause for thought after the latest survey by the central bank showed economists expect a 75 basis-point interest rate cut on Dec. 19. The institution’s President Rosanna Costa said Wednesday that price shocks have been dissipating, especially in volatile items, and inflation has seen a relevant slowdown. Policymakers see cost-of-living increases converging to target by the end of 2024. 

A key price gauge that excludes volatile items increased 6% in the 12 months through November and printed at 0.5% on the month.

While inflation has slowed significantly, “this process is not over yet,” Costa said in a presentation at a seminar in Santiago yesterday. Policymakers needed to “carefully evaluate” economic data and trends as inflation’s slowdown to the target has been more complex in recent times due to intense shocks. 

The peso leaped as much as 1.3% Thursday, while two-year swap rates, a measure of future monetary policy expectations, jumped 16 basis points to 5.76%.

Broad Based

Price increases were spread across different sectors in November. Food and non-alcoholic beverages rose 1% on the month, while transportation gained 1.3% and clothing jumped 3.2%, according to the national statistics institute. 

The inflation report “surprises mainly due to the increase in the prices of goods and, within them, semi-durable goods,” Jorge Selaive, chief economist at Scotiabank Chile, wrote on X, the social media platform formerly known as Twitter. “It’s a supply shock given that demand remains very dull.”

Elsewhere in the region, official data released in Mexico showed annual inflation accelerated to 4.32% in November, sounding a note of caution after the central bank signaled an interest rate cut is on the table in the coming months. Core inflation, a closely watched metric that strips out volatile items like fuel, slowed to 5.3%.

Complicating the outlook, Mexico’s central bank will be grappling with the inflationary impact of a 20% minimum wage increase next year, announced by President Andres Manuel Lopez Obrador last week. 

“With the minimum wage increase and the 2024 budget planning a high deficit, the most since 1988, inflation will keep accelerating” into next year, said Gabriela Siller, director of economic analysis at Grupo Financiero Base.

--With assistance from Giovanna Serafim and Max de Haldevang.

(Updates with economist comments starting in fourth paragraph)

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