For Chile, baseline projection in March 2011's Monetary Policy Report. Sources: Bloomberg and Consensus Forecasts. Figure 10 Incidences on annual CPI inflation (1) (2) (percentage points) 12  12  9  9  6  6  3  3  0  0  -3  01  02  03  04  05  06  07  08  09  10  11  12  13  Othe r (64.7%)  Fre sh fruits and ve ge table s (2,9%)  Foodstuffs w /o fre sh fruits and ve ge table s (21.3%)  Fue ls (5.7%)  Public utilitie s (5.4%)  Total  -3  (1) Gray area, as from first quarter 2011, indicates breakdown of inflation forecast in baseline scenario. (2) In parentheses, shares in CPI basket. Sources: Central Bank of Chile and National Statistics Institute (INE).
In the case of housing, rents reflect the flow of benefits obtained from housing assets—either the monetary return from rental property, or the value of living in owner-occupied housing. Historically, the ratio for the nation as a whole has had many ups and downs, but over time it has tended to return to its long-run average. Thus, when the price-to-rent ratio is high, housing prices tend to grow more slowly or fall for a time, and when the ratio is low, prices tend to rise more rapidly. I want to emphasize, though, that this is a loose relationship that can be counted on only for rough guidance rather than a precise reading. Currently, the ratio for the country is higher than at any time since data became available in 1970— about 25 percent above its long-run average. Of course, the results vary widely from place to place. For Los Angeles and San Francisco, the price-to-rent ratio is about 40 percent higher than the normal level, while for Cleveland the ratio is very near its historical average. Closer to home, the figure for Seattle is just over 35. For Portland, it turns out that the price-to-rent ratio is a bit anomalous. Unlike the ratio for the nation and many of the cities I’ve mentioned, Portland’s ratio has been trending up, and this pattern has been going on since the late 1980s.