The Central Bank of Chili This Tuesday, it cut the reference interest rate by 25 basis points to 5.75% and anticipated a pause for the coming months, at a time when the economy of the world’s largest copper product shows signs of recovery and inflation continues to decline.
However, the decision of the issuing entity, in line with market expectations and published in a statement after the June meeting to define the Monetary Policy Rate (MPR), is the first since January that did not have the unanimity of the Council. while two of the six members opted for a 50-point cut.
“The local economy has been returning to a growth path consistent with its trend and inflation has continued to decline, with two-year inflation expectations remaining at 3%. Compared to March, the news in the central projection scenario is the best starting point for domestic demand, which will be supported by the higher price of copper, and the readjustment of electricity rates, which will significantly impact inflation, particularly in 2025″said the organization.
“The macroeconomic scenario has evolved as expected, although with internal demand that grew somewhat more than expected in the first quarter”, he noted.
In May, the Chilean Government also raised its national GDP growth projection for this year from 2.5% to 2.7% due to the good data for the first quarter and an expected higher price of copper, the South American country’s main export.
Chile recovered faster than expected after the pandemic, with a historic GDP increase of 11.7% in 2021, but in 2022 it began to slow down and closed with 2.4% growth.
Contrary to what was forecast, in 2023 the contraction was avoided and the GDP closed with a timid growth of 0.2%.
Inflation, for its part, shot up to a historic 14.1% in August 2022 due to economic aid to alleviate the impact of the crisis and early withdrawals from pension funds, but the issuer applied an aggressive rate increase and the Inflation closed 2023 at 3.9%.
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Source: Gestion
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