Macro Watch: Chile inflation, Argentina policy rate switch

Monthly inflation in Chile was 0.4% in July, just above the consensus forecast and up from 0.1% in June.

The increase brings January-July inflation to 1.8% and annual inflation to 2.7%, statistics agency Ine said.

The biggest rise in July was in transport inflation, 1.2%.

Research firm Capital Economics expects the central bank to "shift into tightening mode by the end of this year," citing a strengthening economy and a forecast rise in core inflation.

The research firm of local lender Bci expects the bank to raise rates 25 basis points in October.

Chile has held the key rate steady at 2.75% since May 2017.

The central bank's target inflation range is 2.0-4.0%.

ALSO READ: Chile holds key rate steady - but for how long?

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Argentina's central bank has amended its policy framework.

The bank, in a statement, said the interest rate on seven-day Leliq notes – which stands at 40% – will act as the new monetary policy rate.

It started issuing Leliq notes in January to help manage liquidity levels in the banking sector. The Leliq rate will be used instead of the seven-day interbank lending rate.

Capital Economics said the move should eventually help the central bank to "gain better control over monetary conditions."

The company added that the bank "appears to have stopped monetising the government's budget deficit, and has scaled back FX intervention." Such measures are part of a program accompanying a US$50bn standby credit line awarded by the IMF.