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Tips to face the rise of the UF

Inflation reached 13.1%, as reported by the National Institute of Statistics a few days ago. The biggest increase in the Unidad de Fomento (UF), an instrument indexed to current inflation and updated accordingly, would be around $470 next September and would directly affect different sectors. On August 18, it reached $33,624. How to address the rise of the unit?

It was made clear in the latest Consumer Price Index (CPI) that an increase of 1.4% month on month, which directly means that the UF will increase by that amount in the month in relation to the following month. Today we have a unit of measurement that adjusts for inflationary variations and if one has an investment, a time deposit or a lease, from a property owner’s point of view, the value of the property can be preserved. lease.

If everything goes up by 10%, that value can also go up by 10% and, this way, be able to continue getting the same items as before. And it is across each other, in a structure that should be implemented not only in the prices of certain services, but also, for example, in the possible readjustment in the salary of collaborators in the different sectors.

Inflation affects us all and the UF reflects that, remember Alexander Vicondo, academic at the Institute of Economics of the Pontifical Catholic University. The increase in the UF affects all those who have a lease contract, as they often have clauses that are adjusted every three to six months or are fixed, directly, in UF.

But also for those who have mortgage loans -because the dividends are also fixed in those terms and they are going to update significantly due to inflation-, but also soon to the fees in the registration fees of the colleges or universities, because there are also many institutions. adjustment clauses regarding what happens to the UF. “When you have a cold, the thermometer shows the temperature, but it is the flu that bothers you… And the same thing happens with the UF and inflation,” says the UC academic.

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To avoid the increase in the UF and inflation, one of the recommendations is to buy wholesale and replace the items in the basic basket with cheaper ones.

Although there are some sectors of citizens that can be mainly affected. the story is also crossed. “Inflation, and the rise in the UF affects us all, making the cost of living more expensive,” he says. Pablo Pincheira, economist from Adolfo Ibáñez University (UAI). “And it is especially difficult for those who have debts in UF or accounts in UF, such as leases, insurance or tuition,” he says.

The dollar is one of the most volatile instruments. Of ups and downs. Should I buy foreign currency? It is difficult to know, in Vicondoa’s summary, because the price of the dollar that users see in its value has a strong element of uncertainty. “We are facing a currency that is around $880, but sometimes it goes to $920 and then it falls a little bit, and what the estimates show is that between $100 or $150 pesos have been attributed to the uncertainty in the price of the currency ”, the academic mentions, and refers to the constitutional process, the political situation and the economic context in Chile and around the world.

Expectations surveys published by the Central Bank, says Pincheira, from the UAI, show that the dollar is around $900 to $920 in the short term. “They do not show a big rise, but we are in a very volatile situation, where there could be big oscillations depending on the result of the referendum and when the intervention of the Central Bank ends,” he says.

“Since there is positive or negative news, the price should move, but volatility and uncertainty should fall if we expect Chile to grow again and inflation can stabilize, but today it is difficult to invest as before, with a ‘Yes’ or a ‘No’”, he declares. The best advice, he says, is to wait and see what happens locally and internationally, since it is a a good way to hedge against uncertainty domestically and in situations of volatility, but the local scene is enhanced by the ongoing war in Ukraine and the potential conflict between China and Taiwan.

In the long term, investing in property allows you to gain a lot in relation to inflation, especially depending on the sector.

Among the possibilities mentioned by Vicondoa, although it is less common, is the deposit for UF Can be a good choice. “One can invest in UF in banks and, in these periods, you can cover yourself against high inflation, because basically the rate one gets is the real rate, and inflation should add to have the nominal result.”, he declares. And he says that within a year it is expected to be less than the 13% seen today.

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In time deposits there might be another option, but the problem is the fees. “Inflation should be expected to fall, in particular, and it is expected to be 7% for the next year… And one year from now, considering that situation, it could be an option another to partially protect against inflation”, said the PUC professor. “Nominal interest rates are quite high and it is definitely a good alternative to consider,” says Pincheira, from the UAI. In that sense, it is a slightly safer chance, which does not depend on the volatility of the dollar and which is quite strong.

The IS property investment it is a suitable choice. They are an asset to protect against inflation, but there is a risk that property prices will fall if the situation worsens. “It is the risk in the short term, but in a long period it recovers a lot in relation to inflation, especially if it is a good area,” says Vicondoa, from the UC.

“The ways to protect themselves will depend on each of them, because the effects are very significant, especially in families with lower incomes and more limited resources and indebtedness,” he says, suggesting, in the cases here, there are possibilities to seek. better prices, make wholesale purchases and “protect yourself by looking in your pockets”. In this sense, Pincheira says that it is advisable to modify the consumption basket, substituting goods for some cheaper alternatives.

It will, for the first time in years since the health emergency began, be a National Holiday with more normalcy. At least, the specialists agree that although the value of the articles will be higher than on other occasions, there will be sectors that will be reactivated, such as tourism. The most concrete way in which the increase in the UF will come about, says Pincheira, is that “anticuchos will be more expensive.”

Vicondoa, from UC, asserts that the reactivation of tourism can be seen, and that it is one of the most delayed recovery sectors after the pandemic. “In these last caves there were mobility restrictions and even festivals,” says the economist. Another thing, he says, is that we have to wait to see what happens with the traditional bonuses for this season, but what can be expected is an increase in demand for products related to the 18th of May September, mainly food and typical clothes.

Some items related to the national holiday period, such as regular fare and meat, may see their values ​​affected. Users can expect potential increases related to the period.

“A certain increase can be expected, taking into account the government’s plans as well, and that can affect the price of specific products, such as meat, and it would be advisable to expect a little, for the avoid or mitigate increases that occur around the date, ” he says. To these could be added, according to them, the increase in the value of air tickets or long-distance buses, and the leases as well.

Considering that they will be the “normal” national holidays in recent years, “the normal thing for the economy is for all the prices to go up.” “But we also come from a situation where there have been restrictions in recent years and there is a restricted demand to celebrate in a more traditional way,” estimates Vicondoa.

“Since the UF changes according to inflation … if it falls, so does the UF,” says Pincheira. The latest surveys from the Central Bank, he said, show that inflation should start to subside, but they show a reduction at a moderate pace. In addition, Minister Mario Marcel himself confirmed that they expect a recession in inflation for the last quarter of the year.

The UF will then start to grow more slowly and, as a product that could bring the exchange rate down and lower its levels, if it is maintained, it will contribute to maintaining the prices of imported goods. “We are already seeing that the liquidity that came out of the pandemic with IFEs and withdrawals is running out, so there should be less demand in the rest of the year,” says Alejandro Vicondoa, about the last period , in which demand was very high and the economy was overexpanded, which economists considered unsustainable in the long term.

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