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Across Colombia, Chile, Brazil, and China, inflation dynamics are currently shaped by common external themes: exchange rate movements, global commodity prices—particularly oil—and escalating international tariff tensions. Recently, copper prices have emerged as an additional source of risk due to threats of new 50% copper tariffs under Trump’s global trade policy, directly impacting inflation through exchange-rate volatility and reduced export revenues, especially in copper-exporting economies like Chile. Meanwhile, oil prices have broadly eased domestic energy and transportation costs following a recent decline amid reduced geopolitical tensions. Structural domestic factors, including scheduled price resets and varying local demand conditions, further contribute to inflation trends, generating differing degrees of price inertia or deflationary pressures across these economies.

Colombia

KEY MESSAGES:

• Recent peso depreciation (~1.5%) driven by U.S. tariff threats on steel and copper imports.
• Falling Brent crude prices (below $70) due to easing Red Sea tensions, reducing export revenue and weakening the currency.
• Persistent high services inflation (~6%) from January’s scheduled CPI-linked price adjustments and minimum wage hikes.
• Declining global shipping costs providing limited relief, partially offsetting imported inflation pressures.

Colombia’s inflation dynamics are largely determined by two major annual price adjustments, affecting roughly 58% of the CPI basket, as well as fluctuations in oil prices. Each January, key regulated prices—utilities, transportation fares, and education fees—are adjusted based on the previous year’s inflation. Simultaneously, the minimum wage is increased, influencing wages and related costs. These scheduled adjustments have kept service-related prices persistently high.

Externally, Colombia remains sensitive to changes in oil prices, which represent about a quarter of total exports. Recently, Brent crude prices fell due to easing geopolitical tensions around the Red Sea and uncertainty surrounding U.S. tariff policy, causing the peso to depreciate and leading to higher costs for imported goods. Moreover, global tariff threats in late June weakened the peso further (around 1.5%), resulting in a slight upward revision in our short-term inflation forecast—though this was partially offset by lower global shipping costs.

Colombian Peso and Crude Oil 

Overall, we project Colombia’s inflation rate to decline gradually toward 3–4% by mid-2026, provided there are no additional tariff escalations or currency fluctuations that could again raise import prices.

Contribution Word Cloud Colombia CPI YoY, June 2025

Chile

KEY MESSAGES:

• Recent peso weakening tied to uncertainty around potential U.S. tariffs on critical minerals, especially copper.
• Temporary inflation uptick expected in late 2025 due to base effects from earlier electricity tariff increases.
• Copper price recovery throughout 2025 due to global tariff wars, strengthening the peso earlier in the year but now facing volatility.
• Short-lived easing of energy inflation concerns following a temporary Gaza ceasefire.

In Chile, inflation remains anchored by automatic daily price adjustments through a unit of account, influencing key costs like mortgages, rents, education, and professional services, and keeping core inflation persistently near 4%. The slight uptick in the forecast around September–October 2025 can be explained by base effects of the electricity tariff increases: recall that a major portion of electricity hikes occurred by early 2025. By late 2025, the year-over-year comparison will be against late 2024 (when electricity was still cheap), thus inflation in late 2025 may temporarily rise as those higher electricity prices are fully reflected in YoY figures.

Externally, the peso closely follows copper prices, which have risen steadily this year in response to Trump’s global tariff war. Recently, uncertainty around potential U.S. tariffs on critical minerals, including copper, has weakened the peso slightly and increasing import prices further and nudging our inflation forecasts higher. This is mostly captured by elevated inflation expectations in the BCC Survey Forecast indicator. A temporary Gaza ceasefire recently eased energy concerns, providing some relief in our longer-term outlook.

Chilean Peso and Copper Prices


With policy interest rates remaining elevated and global price pressures easing, we anticipate Chilean inflation will continue to hover around 4% through mid-2026, although actual implementation of copper tariffs or renewed geopolitical tensions could still trigger brief, unpriced spikes depending on how domestic demand responds and whether Chile continues to maintain high interest rates.

Contribution Word Cloud Chile CPI YoY, June 2025

Brazil

KEY MESSAGES:

• Real depreciation triggered by potential U.S. steel and iron ore tariffs, increasing near-term imported inflation risk.
• Lower Brent crude prices (below $70) easing domestic fuel and electricity costs, partially offsetting recent FX pressures.
• Moderation in services inflation likely as wage growth slows and regulated prices reset gradually.
• Improved harvesting conditions and reduced food-import levies continue to significantly lower food inflation.Contribution

Brazil’s inflation is shaped by a combination of scheduled price resets: regulated items such as utilities, transport, and telecom adjust at fixed intervals, rents often track the IGP-M index, and the minimum wage increases annually based on past inflation plus GDP growth. These adjustments have kept services inflation elevated around 6%, despite tight monetary policy. However, with wage growth now slowing, we anticipate service price pressures will moderate in the coming months.

Externally, Brazil’s real remains closely linked to iron ore prices, which account for roughly 25% of the country’s export earnings. Discussions around potential U.S. steel and iron ore tariffs may depress ore prices, weakening the real and raising import costs. However, the real remains relatively strong compared to the previous year. Conversely, Brent crude prices dropping below $70 per barrel have eased domestic diesel and electricity costs, supporting lower headline inflation, while at the same time, has contributed to some depreciation in the real given Brazil’s status as a major oil producer.

Brazil’s large trade exposure means that the broader global economic slowdown is putting downward pressure on commodity prices and dampening domestic demand. Improved harvesting conditions and reduced import duties on food have contributed to easing food inflation pressures which Turnleaf was able to capture through its proxy food basket index. Overall, we project Brazil’s CPI to remain elevated at around 5% through mid-2026. However, the potential implementation of substantial tariffs—such as the 50% duties recently threatened by Trump for the beginning of August combined with Lula’s retaliation threats could still generate inflationary spikes later next year.

Contribution Word Cloud Brazil CPI YoY, June 2025

China

KEY MESSAGES:

• Persistent weakness in consumer spending, with aggressive retail discounts in autos and e-commerce sectors to clear inventory.
• Continued deflationary pressures from falling pork prices (-8% YoY) and stable grain prices, suppressing food CPI (~30% of basket).
• Declining global oil and commodity prices further lowering domestic transportation, logistics, and input costs.
• Slight RMB appreciation (~1%) and intensified U.S.-China trade tensions pushing Chinese exporters to lower prices further, maintaining downward inflation pressure.

China’s current low-inflation environment is driven primarily by weak domestic demand, falling global commodity prices, and stable currency dynamics. Domestically, consumer spending remains subdued following a slow post-COVID recovery, leading businesses—especially in sectors like automobiles and e-commerce—to aggressively discount prices to reduce excess inventory. The ongoing downturn in the property market further dampens consumer confidence and spending, while significant overcapacity in heavy industries, such as steel and cement, adds downward pressure on prices.

Food prices, which make up around 30% of China’s CPI basket, remain soft. Pork prices fell over 8% year-over-year in June due to abundant supply, keeping food inflation low despite minor rebounds in other categories like beef.

Externally, lower international oil prices—recently hitting a four-year low—have significantly reduced transportation and energy costs domestically. Similarly, falling global prices for metals and agricultural commodities have lowered import costs, effectively causing China to import deflation. Additionally, the RMB’s slight appreciation against the dollar (~1%) in 2025, coupled with intensifying U.S.-China trade tensions, has compelled Chinese exporters to cut prices to maintain competitiveness, further suppressing inflation.

Contribution Word Cloud China CPI YoY, June 2025