Even super-tight policy is not bringing down inflation

It feels a little unfair. In July 2021, as rate-setters in America and Europe dismissed the risk of entrenched inflation, the Central Bank of Chile got its act together. Worried that inflation would rise and stay high, its policymakers voted to lift rates from 0.5% to 0.75%. The bank has since raised rates again and again, outpacing investors’ expectations and taking the policy rate all the way up to 11.25%. Perhaps no other central bank has pursued price stability with such dedication.

Has the star pupil been rewarded? Hardly. In September Chile’s prices rose by 14% year on year. The central bank’s preferred measure of “core” inflation, which excludes volatile components like energy and food, jumped to 11%.