(YTWHW.com) - Climbing international crude oil prices are the biggest threat to inflation in Chile as the country imports 98.7% of the crude it consumes, Finance Minister Felipe Larrain said Thursday. Private-sector inflation expectations have recently increased on crude's gains abroad, and analysts now see inflation ending the year at 4.4%. The central bank and the government have responded to the higher outlook, with the bank picking up the pace of its rate increases and the Finance Ministry reducing this year's public spending by $800 million. "The biggest risk I see...is higher oil prices and the market uncertainty surrounding crude [production]," Larrain said in prepared remarks before the Icare local business forum. The international prices hikes are then transmitted into the domestic economy, he added. Fuel and transportation prices have a heavy weighting on Chile's consumer price index. He noted that the effects of the recent 9.0-magnitude earthquake in Japan on the local economy had been limited. Ten percent of Chile's exports are bound for Japan, and of these exports, two-thirds are copper exports. The Asian nation will likely continue demanding copper for its reconstruction, analysts estimate.

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