Food prices are expected to fall later this year and the government remains confident it will achieve its target of 5.5 percent inflation for 1997, Garcia said. Gasoline prices are also expected to decline, as are the cost of imports, following the recent appreciation of the peso against the dollar. February's inflation is what we had resigned ourselves to,'' said Jane Winslow, director of Andean research at James Capel in Chile. The yield on central bank eight-year debt in the secondary market closed unchanged at 6.24 percent today following the rise in inflation. The central bank cut its overnight lending rate by 25 basis points to 7.25 percent above inflation last month, saying inflation and economic growth were slowing.
Many analysts expect further rate cuts later as growth continues to slow.
The overnight lending rate won't fall below 6.5 percent above inflation this year, he said. An acceleration in the growth of wages in January didn't concern analysts. The wage index rose 9.9 percent in January from the year earlier, up from 9.5 percent growth in December and down from 10.8 percent in November and 11.3 percent in both October. The central bank had previously said robust wage growth was one of economic indicators impeding a cut in interest rates. Still, the wage increases are covered by advances in productivity and don't represent a threat to inflation, Garcia said.