Thursday April 13 2017
Chile Unexpectedly Cuts Interest Rate To 2.75%
Mario | mario@tradingeconomics.com

Chile’s central bank cut the benchmark interest rate by 25 bps to 2.75 percent in its April 13th, 2017 meeting. Market participants were expecting no change. The move leaves the interest standing at its lowest level since October of 2010. In the central bank’s policy statement, the policymakers mentioned that economic activity remains subdued and that inflation is expected to remain on target. Members of the board also underscored that further easing will depend on mid-term inflation expectations.

Inflation came at 2.7 percent in March, at the same pace as February and within the central bank’s target of 2.0-4.0 percent. Core inflation eased to 2.2 percent, the lowest since November of 2013. The central bank predicts year-end inflation of 2.7 percent in 2017.

In its March quarterly inflation report, the central bank lowered GDP estimates, while leaving unchanged inflation forecasts, suggesting that a more accommodative monetary stance may be expected this year.  

Statement by the Central Bank of Chile:

Internationally, global financial conditions remain favorable and various indicators point to a scenario of stronger growth and higher inflation in the developed world. Commodity prices showed mixed fluctuations, where the higher oil price stood out. Overall, important risks persist.

On the domestic front, inflation and activity performed in line with forecasts in the March Monetary Policy Report. Annual inflation remained at 2.7% and expectations at the end of the projection horizon are near the target. Indicators on economic activity and domestic demand remain weak. In particular, the labor market has deteriorated somewhat more than foreseen.

To ensure the convergence of inflation to the policy target, the Board will assess the need for some additional increase in the monetary impulse, which will hinge on the medium-term inflation outlook. As always, it reiterates its commitment to conduct monetary policy with flexibility, so that projected inflation stands at 3% over the policy horizon.




Monday March 20 2017
Chile Annual GDP Growth Slows To 0.5% In Q4
Luisa Carvalho | luisa.carvalho@tradingeconomics.com

The Chilean economy advanced 0.5 percent year-on-year in the last quarter of 2016, slowing from an upwardly revised 1.8 percent expansion in the previous period. It is the lowest growth rate since the 2009 recession as public spending slowed sharply and investment and exports slumped. Considering 2016, the Chilean economy expanded 1.6 percent, lower than a 2.3 percent growth in 2015.

Year-on-year, government spending eased sharply (1.7 percent vs 7.1 percent in Q3), fixed investment contracted further (-5 percent vs -2.4 percent) and external trade contributed negatively to growth as exports declined 2 percent (from 0.1 percent in Q3) and imports were flat (from -2 percent in Q3). On the positive note, household expenditure grew slightly more (2.4 percent vs 2.3 percent in Q3).

On the production side, growth eased for internal trade (3 percent from 3.4 percent in Q3); transport (2 percent from 4.2 percent in Q3); communications (1.7 percent from 2.6 percent in Q3) and personal services (3 percent from 6.1 percent in Q3).Business services declined 3.5 percent (from -2.1 percent in Q3); mining fell 3.3 percent (from -0.8 percent in Q3) driven by lower production of copper (- 3 percent) and manufacturing decreased 2.2 percent (from -0.8 percent in Q3), dragged down by beverages and tobacco (-2.2 percent), chemicals (-4.4 percent) and non-metallic minerals and metals (-8.5 percent). Also, construction edged down 0.2 percent (from 2.2 percent in Q3) and utilities fell sharply (-7.6 percent from -2.8 percent in Q3). In contrast, output rose faster for financial services (2.9 percent from 2.7 percent in Q3); agriculture (8.3 percent from 2 percent in Q3) and fishing (1.6 percent from 0.8 percent in Q3).

On a quarterly basis, the economy contracted 0.4 percent compared to an upwardly revised 0.9 percent expansion in the previous three months.

Considering full 2016, mining production shrank 2.9 percent (after being flat in 2015), mainly due to  copper (-2.7 percent compared to 0.1 percent). Contractions were also recorded in manufacturing (-0.9 percent from 0.2 percent in 2015) and business services (-1.8 percent compared to 1.2 percent). In addition, production slowed in agriculture (4.5 percent compared to 9.8 percent), mainly due to wine; construction (2.5 percent compared to 3.9 percent); financial services (3.7 percent compared to 5.4 percent); transport (3.3 percent compared to 3.7 percent) and restaurants and hotels (0 percent compared to 2.9 percent). In contrast, activities rose faster in internal trade (3.4 percent compared to 2.3 percent), personal services (5.2 percent compared to 1.8 percent) and real estate (2.7 percent compared to 2.2 percent). 




Thursday March 16 2017
Chile Cuts Interest Rate To 3.0%
Mario | mario@tradingeconomics.com

The Chilean Central Bank cut the key rate to 3.0 percent on March 16th of 2017 after leaving the Monetary Policy Rate (MPR) unchanged in February in an attempt to boost growth amid a slowdown in inflation. The decision matched expectations. In the press release, the central bank stressed that inflation remains within target and that economic activity remains sluggish. Policymakers underscored that further easing could be seen if current macroeconomic and inflationary trends persist.

Inflation came at 2.7 percent in February, marginally down from January’s 2.8 percent and within the central bank’s target of 2.0-4.0 percent. Core inflation dropped from 2.7 percent in January to 2.3 percent in February, the lowest figure since December 2013. The Central Bank predicts year-end inflation of 2.7% in 2017.

The latest economic survey by the Chilean Central Bank showed that although analysts kept unchanged their 2018 GDP estimate, recent data led them to lower their growth expectations for this year. Industrial production returned to the red in January, falling 0.9 percent year-on-year after growing 1.4 percent in the previous month. Mining dropped 1.9 percent and manufacturing fell 1.1 percent.  

Statement by the Central Bank of Chile:

Internationally, global financial conditions have remained favorable. In the developed world, inicators continue to point to a scenario of stronger growth and higher inflation. In this context, expectations of a monetary policy normalization have strenghtened, especially in the US. Commodity prices decreased, most notably oil. Overall, imporant risks persist.

On the domestic front, annual inflation was 2.7%, in line with forecasts in December's Monetary Policy Report. Inflation expectations at the end of the projecdtion horizon are near the target, although for the coming months they are in the lower part of the tolerance range. Activity and demand indicators remain weak. In the labor market, salaried employment deteriorated further, although the unemployment rate remained stable.

The Board estimates that, if the recent trends of the economic scenario persist, and so their implications on the medium-term inflation outlook, it could be necessary to increase the monetary impulse. At the same time, it reiterates its commitment to conduct monetary policy with flexibility, so that projected inflation stands at 3% over the policy horizon.



Wednesday February 15 2017
Chile Interest Rate Kept At 3.25%
Central Bank of Chile | Luisa Carvalho | luisa.carvalho@tradingeconomics.com

The Chilean Central Bank left the key rate unchanged at 3.25 percent in February after cutting the Monetary Policy Rate (MPR) by 25 bps in January in an attempt to boost growth amid a slowdown in inflation. Annual inflation in January stood below the central bank’s target for the fourth consecutive month, coming at 2.8 percent year-on-year following a 2.7 percent reading in December. Policymakers also said that attending the current economic scenario, it will be probably necessary to boost the monetary impulse.

Statement by the Central Bank of Chile:


Internationally, global financial conditions continued to improve and emerging economies’ asset prices have risen further, as the good performance of some economies in the region stands out. The price of copper rose, owing partly to supply- side factors. Oil has remained around the prices of a month ago. Global activity indicators continue to point to a recovery, especially in the developed world. Still, significant risks remain.

At home, annual inflation was 2.8%, consistent with forecasts in the last Monetary Policy Report. Inflation expectations at the end of the projection horizon are near target, although for the coming months they remain in the lower part of the tolerance range. Activity and demand indicators remain weak, while the labor market continues to show previous trends. Long-term interest rates fell and the peso appreciated.

The Board estimates that, in the most likely scenario, it will be necessary to boost the monetary impulse over the short term. At the same time, it reiterates its commitment to conduct monetary policy with flexibility, so that projected inflation stands at 3% over the policy horizon.




Thursday January 19 2017
Chile Cuts Key Interest Rate To 3.25%
Central Bank of Chile | Joana Ferreira | joana.ferreira@tradingeconomics.com

The Central Bank of Chile lowered its benchmark interest rate by 25bps to 3.25 percent on January 19th, 2017, as widely expected, in an attempt to boost growth amid a slowdown in inflation. Annual inflation rate fell to 2.7 percent in December, the lowest in over three years. Policymakers also said that if the recent trends of the economic scenario and inflation persist, it will be necessary to boost the monetary impulse.

Statement by the Central Bank of Chile:

Internationally, global financial conditions have improved and emerging economies’ asset prices have risen. The prices of copper and oil, beyond ups and downs, have remained above those of mid-2016. Activity indicators confirm improvements in the developed world and a weakening in Latin America.

At home, the CPI posted an unexpectedly low monthly variation, resulting in a 2.7% increase for the year. Inflation expectations at the end of the projection horizon are near target, although for the coming months they remain in the lower part of the tolerance range. Again, activity showed weak figures, this time concentrating in sectors other than natural resources. All in all, demand-side indicators continue to grow at a similar pace of previous quarters. The labor market continues along previous trends.

Long-term interest rates returned to their pre-US-election levels. As was said in the last Monetary Policy Report, the Board estimates that, if the recent trends of the economic scenario persist, and so do their implications on the mediumterm inflation outlook, it will be necessary to boost the monetary impulse. At the same time, it reiterates its commitment to conduct monetary policy with flexibility, so that projected inflation stands at 3% over the policy horizon.


Tuesday December 13 2016
Chile Holds Interest Rate At 3.5% In December
Central Bank of Chile | Joana Ferreira | joana.ferreira@tradingeconomics.com

The Central Bank of Chile held its benchmark interest rate at 3.5 percent on December 13th, 2016, as widely expected, saying the monthly CPI variation in November was in line with expectations while provisional data for the fourth quarter revealed a weak economic performance particularly in mining and some manufacturing sectors. Policymakers also said that if the recent trends of the economic scenario and inflation persist, it will be necessary to boost the monetary impulse.

Statement by the Central Bank of Chile:

Internationally, long-term interest rates continued to rise in the developed world. Regarding commodities, it is worth noting the increase in the oil price and the persistence of the copper price above its mid-year levels. Activity figures are yet to improve. There outlook is not changing significantly in part because there is no clarity about the effects of potential changes in the economic policies of developed countries yet.

In November, the monthly CPI variation was in line with forecasts, posting an annual variation of 2.9%. Inflation expectations at the end of the projection horizon are near target, although for the coming months they will remain in the lower part of the tolerance range. Provisional data for the fourth-quarter reveal a weak performance particularly in mining and some manufacturing lines. At the same time, demand data points to growth rates similar to recent quarters. The labor market continues to adjust at a gradual pace. Long-term interest rates have undone part of their previous increases and the peso has appreciated.

The Board estimates that, if the recent trends of the economic scenario persist, and so do their implications on the medium-term inflation outlook, it will be necessary to boost the monetary impulse. At the same time, it reiterates its commitment to conduct monetary policy with flexibility, so that projected inflation stands at 3% over the policy horizon.


Friday November 18 2016
Chile Annual GDP Growth Beats Estimates at 1.6%
Joana Taborda | joana.taborda@tradingeconomics.com

The Chilean economy advanced 1.6 percent year-on-year in the third quarter of 2016, the same as an upwardly revised 1.6 percent expansion in the previous period and better than market expectations of 1.4 percent. Household spending accelerated while investment contracted for the first time this year. External trade also contributed positively to growth as imports shrank.

Year-on-year, household spending increased at a faster 2 percent (1.8 percent in the previous period) while government consumption eased slightly (6.9 percent compared to 7.5 percent in the previous period). Gross fixed capital formation shrank 1.2 percent, compared to a 3 percent gain in the previous period as investment in construction declined 1.8 percent and machinery and equipment fell 0.7 percent. Exports rose at a slower 0.5 percent (0.9 percent in the previous period) and imports fell 1.4 percent (0.2 percent in the previous period). 

On the production side, internal trade increased 3.1 percent; transport rose 5 percent and business services edged up 0.1 percent. Agriculture rose 0.7 percent, boosted by production of fresh vegetables. In contrast, mining shrank 0.8 percent, marking the fifth straight quarter of decline. Copper output which accounts for 15 percent of the GDP declined 0.5 percent and remaining extraction fell 3.5 percent, namely gold and silver while iron and coal increased. Manufacturing went down 1.4 percent, mainly due to lower production of drinks/wine and tobacco. In addition, construction shrank 1.4 percent and utilities fell 3.7 percent. 

On a quarterly basis, the economy advanced 0.6 percent, recovering from a 0.4 percent contraction in the previous period and in line with expectations as mining and manufacturing bounced back. 


Friday November 18 2016
Chile Holds Key Rate at 3.5%
Central Bank of Chile | Yekaterina Guchshina | yekaterina@tradingeconomics.com

The Central Bank of Chile left its benchmark monetary policy interest rate unchanged at 3.5 percent on November 16th, 2016, as widely expected. Policymakers said in October, the monthly CPI variation was again unexpectedly low, driving annual inflation to 2.8 percent. At short terms, inflation expectations have dropped, but are near the target of 3 percent at the end of the projection horizon.

Statement by the Central Bank of Chile:

Internationally, the volatility of financial markets increased after the US elections. It is
worth noting the appreciation of the dollar and especially the rise in long-term rates.
Financial conditions facing emerging economies worsened, but remain better than they
were early in the year. Commodity prices have posted mixed movements. The prices of
metals—especially copper—increased, while those for oil and derivatives fell. Activity
indicators and prospects show no important change, but the potential effects of recent
events have yet to become apparent.

In October, the monthly CPI variation was again unexpectedly low, driving annual
inflation to 2.8%. At short terms, inflation expectations have dropped, but are near the
target at the end of the projection horizon. In the third quarter, domestic output and
demand behaved in line with forecasts in the September Monetary Policy Report.
Accordingly, the labor market continues to adjust gradually. Long-term interest rates
have increased.

The Board reiterates its commitment to conduct monetary policy with flexibility, so that
projected inflation stands at 3% over the policy horizon. Any future changes in the
monetary policy rate will depend on the implications of domestic and external
macroeconomic conditions on the inflationary outlook.


Tuesday October 18 2016
Chile Leaves Monetary Policy Steady in October
Central Bank of Chile | Joana Taborda | joana.taborda@tradingeconomics.com

The Central Bank of Chile left its benchmark interest rate unchanged at 3.5 percent on October 18th 2016 as widely expected. Policymakers said September inflation was unusually low at 3.1 percent, signaling the inflation will approach the 3 percent target sooner than expected.

Statement by the Central Bank of Chile:
 
Internationally, monetary and financial conditions are still favorable and long-term interest rates remain low. On the activity side, incoming data brought no big news, pointing to a gradual recovery of world growth next year. Despite fluctuations, the prices of commodities rose during the month, especially oil.
 
On the domestic front, September’s CPI was unexpectedly low, making annual inflation approach 3% sooner than expected. Various expectations indicators place inflation around the target in the projection horizon. Partial third-quarter data continue to point at limited growth in output and demand, consistent with the Monetary Policy Report’s baseline scenario. The labor market continues to adjust gradually.
 
The Board reiterates its commitment to conduct monetary policy with flexibility, so that projected inflation stands at 3% over the policy horizon. Any future changes in the monetary policy rate will depend on the implications of domestic and external macroeconomic conditions on the inflationary outlook.


Friday September 16 2016
Chile Keeps Key Rate on Hold at 3.5%
Central Bank of Chile | Mojdeh Kazemi| mojdeh@tradingeconomics.com

The Central Bank of Chile left its benchmark interest rate unchanged at 3.5 percent on September 15th as widely expected, keeping its neutral stance as inflation has slowed. Last month, policymakers dropped its tightening bias, signalling no rate hikes are expected in the near future due to lower inflationary pressures. Yet, the inflation rate eased to a 30-month low of 3.4 percent in August.

Statement by the Central Bank of Chile:

Internationally, the movements of the financial markets have been dominated by the prospect of what the Federal Reserve will do at its meeting next week. Anyway, despite some volatility, monetary and financial conditions are still favorable and long-term interest rates remain low. On the activity side, the weakness of recent indicators in the United States and the improvement of Chinese figures stand out. Beyond fluctuations, the prices of copper and oil are similar to those of a month ago. 

On the domestic front, annual CPI inflation dropped to 3.4%, in line with forecasts. Expected inflation two years ahead remains at 3%. Partial third-quarter data point at limited growth in output and demand, consistent with the Monetary Policy Report’s baseline scenario. Confidence indicators are still in pessimistic territory. The labor market continues to reflect a gradual deterioration, with a slightly higher unemployment rate. 

The Board reiterates its commitment to conduct monetary policy with flexibility, so that projected inflation stands at 3% over the policy horizon. Any future changes in the monetary policy rate will depend on the implications of domestic and external macroeconomic conditions on the inflationary outlook.