Friday February 02 2018
Chile Holds Policy Rate at 2.5%
Central Bank of Chile | Joana Ferreira | joana.ferreira@tradingeconomics.com

The Central Bank of Chile held its benchmark interest rate at 2.50 percent on February 1st, 2018, as widely expected, saying risks to the economic activity have receded since last meeting and inflation is expected to remain below previous forecasts due to a stronger peso. Chile's inflation for 2017 was 2.3 percent, the lowest in five years and below the bank's target of 3 percent.

Excerpts from the statement of the Central Bank of Chile:

Activity indicators for the fourth quarter of 2017 are somewhat better than expected in the baseline scenario of December’s Monetary Policy Report, with important surprises in some sectors associated with investment, which slightly outperformed the Banks’ estimates. Consumption maintains the trend of previous months, with stronger growth in sales of durable goods, particularly automobiles. Annual growth in non-durable consumption is rather sluggish, but has picked up in recent months. The wage bill, growing at a pace close to 3.5%, continues to sustain the expansion of consumption. Mining and industrial exports ended the year with significant growth rates in terms of both value and volume, reversing the trend of previous quarters. Salaried employment has increased its annual variation rate, reflecting growth in public hiring. The unemployment rate declined in its latest print, but remains above year-ago levels. Annual growth in nominal and real wages is fairly unchanged at levels around 4.5% and 2.5%, respectively. In this context, private growth expectations increased, as did confidence indicators.

Inflation has brought no big surprises and remains around 2% annually for both headline and core CPI (CPIEFE). Its evolution continues to reflect the impact of the exchange rate drop over the last few months, the poor dynamism of activity and the effects of some particular shocks. The annual variation of the goods CPIEFE is around 0% and the services index variation is close to 3%. Among the more volatile prices, fruits and vegetables went back to slightly positive annual growth. Inflation expectations had limited movements. While in the short term they have been adjusted downward somewhat, at two years they show no change with respect to the previous Meeting.

The Board’s decision estimates that incoming data is consistent with the baseline scenario of December’s Report. At the same time, some of the risks identified therein have diminished. In particular, the latest activity figures make it more likely that the economy will achieve the expected traction, while domestic financial conditions remain favorable. Thus, despite inflation expected to be somewhat below previous forecasts for some months, mainly due to the evolution of the exchange rate, the threats to its convergence to 3% have been attenuated in the margin. In this context, the Board considers that the general orientation of monetary policy outlined in the Monetary Policy Report is still adequate. That is, a monetary impulse that will remain fairly unchanged, and that withdrawal will only begin once the closing of the gaps is consolidated.

In any case, the Board will pay special attention to any signs of a delay in the convergence of inflation that might warrant an additional monetary impulse. It also reaffirms its commitment to conduct monetary policy with flexibility, so that projected inflation stands at 3% over the two-year horizon.




Thursday December 14 2017
Chile Holds Interest Rate Unchanged for 7th Meeting
Mario | mario@tradingeconomics.com

Chile’s central bank kept the benchmark interest rate unchanged at 2.50 percent on 14 December 2017, leaving the rate unchanged for the seventh straight meeting. The outcome matched consensus expectations, and leaves the interest rate at its lowest level since September of 2010. Policymakers underscored that the global outlook remained practically unchanged since the previous meeting. They also mentioned that investment remains subdued, mainly affected by construction activity. Chile's annual consumer price inflation was 1.9 percent in November 2017, unchanged from October.

Statement by the Central Bank of Chile:

On the external front, activity figures in the developed world continue to point to a synchronized recovery, although inflation rates that reamin low. Monetary policies have evolved as expected. In this context global financial conditions show no major changes. Commodity prices have evolved along dissimilar paths. The copper price, with ups and downs, is a little below its month-ago level. 

At home, in November the CPI rose 0.1%, keeping annual inflation at 1.9%. Meanwhile, the CPIEFE dropped 0.1% to 1.8% in annual terms. Inflation expectations stayed fairly unchanged. Activity and demand data for the beginning of the fourth quarter are in line with the Monetary Policy Report’s baseline scenario and continue to reflect the weak activity of non-mining industries and particularly of sectors relating to construction investment. Expectations of consumers and business are stable. The labor market continues to show dynamism of self-employment and weakness of salaried work. The peso and other financial variables have shown important movements in the last month.

Economic data made available after the December Report are consistent with the baseline scenario. However, the risks of a delay in the convergence of inflation associated to its current persistently low level are still present, so, if deemed necessary, the Board will promptly adjust the monetary impulse. Accordingly, it reiterates its commitment to conduct monetary policy with flexibility, so that projected inflation stands at 3% over the two-year horizon.


Monday November 20 2017
Chile GDP Growth At 1-1/2-Year High in Q3
Banco Central de Chile | Luisa Carvalho | luisa.carvalho@tradingeconomics.com

The economy of Chile advanced 2.2 percent year-on-year in the third quarter of 2017, following an upwardly revised 1 percent growth in the previous period and matching market consensus. It was the strongest expansion since the first quarter of 2016, as household spending rose faster and exports rebounded while investment fell less.

Year-on-year, household spending increased 2.8 percent, higher than a 2.6 percent rise in Q2. Gross fixed capital investment contracted less (-2.3 percent compared to -4.6 percent in Q2), but marked the fifth consecutive quarter of declines. Construction investment fell 7.5 percent (-7.6 percent in Q2) and investment in machinery and equipment advanced at a faster pace (6.4 percent compared to 0.7 percent in Q2). Meanwhile, government spending slowed (2.2 percent compared to 3 percent in Q2). Exports rose 3 percent, recovering from a 3 percent decrease in Q2, as sales of industrial, agricultural and mining products rebounded. Meantime, imports went up at a softer 4.4 percent compared to a 6.7 percent surge in Q2.

On the production side, mining activity rebounded sharply (7.5 percent compared to -3 percent), mainly driven by copper production (8.2 percent compared to -2.3 percent). Also, manufacturing grew faster (1 percent compared to 0.4 percent), boosted by stronger production of wood and furniture; crude oil refining and metal products, machinery and equipment. In addition, higher growth rates were also recorded for: fisheries (14 percent compared to 8.9 percent in Q2); internal trade (4.4 percent compared to 3.5 percent); utilities (4.1 percent compared to 0.8 percent); transport (2 percent compared to 0.8 percent); financial services (4.3 percent compared to 3.6 percent) and personal services (3.1 percent compared to 2.8 percent). On the other hand, output grew less for restaurants and hotels (0.9 percent compared to 1.1 percent); communication and information (3.8 percent compared to 4 percent); real estate activities (2.5 percent compared to 2.9 percent) and public administration (1.8 percent compared to 2.3 percent). Meantime, output declines were recorded for agriculture (-1.3 percent compared to 0.3 percent); construction (-6 percent compared to -3.7 percent) and business services (-1.7 percent compared to -2.3 percent).

On a quarterly basis, the GDP expanded 1.5 percent, following an upwardly revised 0.9 percent growth in Q2.




Wednesday November 15 2017
Chile Holds Interest Rate Unchanged for 6th Meeting
Mario | mario@tradingeconomics.com

Chile’s central bank kept the benchmark interest rate unchanged at 2.50 percent on November 14th of 2017, leaving the rate unchanged for the sixth straight meeting. The outcome matched consensus expectations, and leaves the interest rate at its lowest level since September of 2010. Policymakers underscored that the global outlook remained practically unchanged since the previous meeting. They also mentioned that investment remains subdued, mainly affected by construction activity. Chile's annual consumer price inflation rose to 1.9 percent in October 2017 from a four-year low of 1.5 percent in September.

Statement by the Central Bank of Chile:

On the external front, third-quarter activity figures are consistent with a more dynamic scenario. Global financial conditions show no major changes. The oil price increased in recent weeks, while the copper price declined slightly, but it is still above expectations.

At home, October’s CPI inflation of 0.6% exceeded the forecast, partly undoing the negative surprise of September, and placing annual inflation at 1.9%. Inflation expectations at short terms remain low, and medium-term expectations have remained constant. Third-quarter data at hand show the evolution of activity and demand in line with the latest Monetary Policy Report’s baseline scenario. Private consumption has performed in line with the labor market’s evolution and with not-so-pessimistic expectations. Investment is still weak, affected by construction activity.

Activity figures made available after the September Report are consistent with the baseline scenario and the monetary impulse depicted therein. However, inflation will remain low in the short term. This could delay its convergence to the target within the two-year horizon. The Board will pay special attention to this risk—already identified in the Report—as it could require adjusting the policy rate. At the same time, the Board reiterates its commitment to conduct monetary policy with flexibility, so that projected inflation stands at 3% over the two-year horizon.



Thursday October 19 2017
Chile Keeps Key Rate Steady Despite September Disinflation
Mario | mario@tradingeconomics.com

Chile’s central bank kept the benchmark interest rate unchanged at 2.50 percent on October 18th of 2017, leaving the rate unchanged for the fifth straight meeting. The outcome matched consensus expectations, and leaves the interest rate standing at its lowest level since September of 2010. Policymakers underscored that economic conditions keep slightly improving and that no major surprise was observed since the September meeting, excluding the CPI’s downturn, which according to members of the monetary committee could trigger an adjustment to the policy rate. Chile's consumer prices increased 1.5 percent year-on-year in September of 2017, easing from 1.9 percent in the previous month. It was the lowest inflation rate since October of 2013.

Statement by the Central Bank of Chile:

On the external front, global activity and prospects brought no big news, and the signs of stronger dynamism remain. Global financial conditions remain favorable. The main development of the month was the increase in some commodity prices, especially copper and oil.

On the domestic front, September’s CPI inflation was surprisingly low, pulling its y-o-y change to 1.5%. While inflation expectations at shorter terms declined significantly, at longer terms they saw limited adjustments. Third-quarter data at hand show activity and demand behaving in line with the latest Monetary Policy Report’s baseline scenario, and the better performance of consumer-related sectors relative to investment-related ones continues to stand out. The behavior of private consumption reflects the evolution of the labor market and expectations becoming less pessimistic.

Activity figures made available after the September Report are consistent with the baseline scenario and the monetary impulse depicted therein. However, incoming inflation figures point to it falling short of expectations in the short term. This could delay its convergence to the target within the two-year horizon. The Board will pay special attention to this risk—already identified in the Report—as it could require adjusting the policy rate. At the same time, the Board reiterates its commitment to conduct monetary policy with flexibility, so that projected inflation stands at 3% over the two-year horizon.


Friday September 15 2017
Chile Key Rate Kept On Hold for 4th Straight Meeting
Mario | mario@tradingeconomics.com

Chile’s central bank kept the benchmark interest rate unchanged at 2.50 percent in September 14th of 2017, leaving the rate unchanged for the fourth straight meeting. The outcome matched consensus expectations, and leaves the interest rate standing at its lowest level since September of 2010. Policymakers underscored that economic conditions improved since the last meeting, with copper prices climbing over the last months despite a recent downturn. Members of the board did not adopt an explicit bias on this occasion. Chile's consumer prices increased 1.9 percent year-on-year in August of 2017, above 1.7 percent in the previous month. It was the highest inflation rate since May.

Statement by the Central Bank of Chile:

On the external front, the financial markets were somewhat more volatile, in a context where global financial conditions remain favorable and the US dollar has weakened. World activity prospects are still positive; commodity prices rose in the last month, including copper, even considering its recent drop.

On the domestic front, August’s inflation was in line with forecasts in the last Monetary Policy Report, at 1.9% annually. Inflation expectations at shorter terms have fallen, reflecting the effects of the peso appreciation, but remain around 3% two years out. Regarding activity, the improved performance of consumption-related sectors continues to stand out, outperforming those related with investment. The behavior of private consumption reflects the labor market situation and not-so-pessimistic expectations.

Incoming data since the publication of the September Report are consistent with the baseline scenario and the monetary impulse described therein, i.e., the policy rate staying close to its current levels and beginning to rise to neutral only once the economy starts closing the activity gap. The risk balance has not changed either. In particular, the risk balance for medium-term inflation and activity are estimated to be unbiased, but with a downward bias for short-term inflation. As always, the Board will continue to monitor any deviations of the baseline scenario that may hinder the convergence of inflation to 3% over a two-year horizon and warrant moving the monetary policy interest rate.


Friday August 18 2017
Chile GDP Advances 0.9% YoY in Q2
Banco Central de Chile | Joana Taborda | joana.taborda@tradingeconomics.com

The economy of Chile expanded 0.9 percent year-on-year in the second quarter of 2017, following a meager 0.1 percent expansion in the previous period which was the lowest since the 2009 recession. Figures came in line with market expectations as a stronger household spending was able to offset falls in investment and exports.

Year-on-year, household spending increased 2.6 percent, following a 1.8 percent rise in Q1. On the other hand, public expenditure rose less (2.7 percent compared to 4.9 percent in Q1). Gross fixed capital investment shrank 4.1 percent, following a 2.4 percent drop in Q1 and marking the fourth straight quarter of decreases. Construction investment went down 6.5 percent (-6.2 percent in Q1) and investment in machiney and equipment rose a meager 0.1 percent (4.3 percent in Q1). Exports went down 3.5 percent (-4.2 percrnt in Q1), mainly due to lower sales of mining and industrial goods and imports rose at a faster 7 percent (4.6 percent in Q1).

On the production side, higher growth rates were recorded for real estate (2.4 percent compared to 1.8 percent in Q1); communication (3.5 percent compared to 2.4 percent); transport (0.8 percent compared to 0.7 percent) and restaurants and hotels (0.7 percent compared to 0.6 percent in Q1). In addition, the output for utilities rebounded (0.6 percent compared to -0.2 percent). On the other hand, slower growth rates were seen for personal services (2.8 percent compared to 3.7 percent) and internal trade (3.4 percent compared to 5.8 percent). The manufacturing sector stalled, following a 1 percent rise in Q1. Lower production of wine, beer, tobacco, canned fruit and non-metallic minerals offset a rise in fishing, cellulose and metal products. The mining sector shrank 3 percent, following a 13.8 percent slump in the previous period. Copper production went down 2.3 percent (-14.3 percent in Q1) amid a slow recovery in the Escondida mine after the stoppage in the previous quarter. In addition, maintenance and unfavourable weather conditions also weighed down on the the sector's performance. Construction slumped 3.7 percent (-1.7 percent in Q1).

On a quarterly basis, the economy expanded 0.7 percent, following a downwardlt revised 0.1 percent rise in Q1.


Thursday August 17 2017
Chile Leaves Interest Rate Unchanged At 2.50%
Mario | mario@tradingeconomics.com

Chile’s central bank kept the benchmark interest rate unchanged at 2.50 percent in its August 17th, 2017 meeting following no change in its July and June meetings. The outcome matched consensus expectations, and leaves the interest rate standing at its lowest level since September of 2010. Policymakers underscored that economic conditions improved since the last meeting, with the peso appreciating the copper prices heading north. Members of the board did not adopt an explicit bias on this occasion. Chile's consumer prices increased 1.7 percent year-on-year in July of 2017, the same pace as in the previous month.

Statement by the Central Bank of Chile:

Incoming international news continue to point to a favorable scenario. The world activity outlook has strengthened and global financial conditions remain expansionary.  In general, commodity prices have increased, most notably in the case of copper.

On the domestic front, July’s inflation was 0.2%, thus in annual terms it remained at 1.7%, below the last Monetary Policy Report’s estimate. Inflation expectations brought no relevant news. During the second quarter activity posted weak growth, attributable to the performance of some investment-related sectors and some specific factors. Private consumption remains stable, in line with conditions in the labor market and expectations that have become less pessimistic. The peso has appreciated.

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.


Thursday July 13 2017
Chile Holds Key Rate At 2.5% For 2nd Meeting
Mario | mario@tradingeconomics.com

Chile’s central bank kept the benchmark interest rate unchanged at 2.50 percent in its July 13th, 2017 meeting following no change in its June meeting and a 25 bps cut in May. The outcome matched consensus expectations, and leaves the interest rate standing at its lowest level since September of 2010. Policymakers reiterated that inflation stood at 1.7 percent year-on-year in June, easing from 2.6 percent in May. Members of the board did not adopt an explicit bias on this occasion.

Chile's consumer prices increased 1.7 percent year-on-year in June of 2017, easing from a 2.6 percent rise in the previous month. It was the lowest inflation rate since October of 2013. Annual core inflation advanced 2 percent, following a 2.5 percent rise in the previous month. On a monthly basis, consumer prices went down 0.4 percent compared to a 0.1 percent gain in May. 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. The central bank dropped its bias on this occasion, recognizing that copper prices have improved but construction and mining activity remain weak.

Statement from the Central Bank of Chile:

Internationally, long-term interest rates increased, but financial conditions remain favorable. In general, news was consistent with the scenario of gradual recovery in global activity. The copper price rose, while the oil price, beyond fluctuations, trades near its levels of last month.

On the domestic front, most noteworthy was June’s monthly inflation at –0.4%, heavily influenced by the behavior of prices of fresh fruits and vegetables and some other products, which resulted in y-o-y inflation standing at 1.7%. Inflation expectations at shorter terms have dropped, but at the end of the projection horizon are near the target. Partial second-quarter figures for activity and demand are consistent with forecasts, and reflect the negative impact of mining and construction. Private consumption growth remains stable, in line with the performance of the labor market.

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.


Thursday June 15 2017
Chile Keeps Interest Rate At 2.5% And Drops Bias
Mario | mario@tradingeconomics.com

Chile’s central bank kept the benchmark interest rate unchanged at 2.50 percent in its June 15th, 2017 meeting following a 25 bps cut in its May 18th meeting. The outcome matched consensus expectations, and leaves the interest standing at its lowest level since September of 2010. Policymakers reiterated that mining and construction activity remains soft, and that inflation (currently at 2.6 percent year-on-year) is expected to remain on target. Members of the board did not mention this time around if the room for further easing remains open.

Chile's consumer prices increased 2.6 percent year-on-year in May of 2017, easing from a 2.7 percent rise in the previous month. It is the lowest inflation rate since November 2013, as cost slowed significantly for food and non-alcoholic beverages (2.6 percent vs 4.2 percent in April). Annual core inflation rose by 2.2 percent, at the same pace as Annual core inflation advanced 2.5 percent, after standing at 2.2 percent for the months (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. However, the central bank dropped its bias on this occasion.

Statement by the Central Bank of Chile:

Internationally, indicators continue to show favorable financial conditions and a scenario of gradual economic recovery in the main developed countries, as described in the latest Monetary Policy Report. Commodity prices show mixed fluctuations, where the drop in the prices of oil and derivatives stands out.

On the domestic front, annual inflation stood at 2.6% and inflation expectations at the end of the projection horizon remain near the target. Partial second-quarter figures for activity and demand are consistent with forecasts, and reflect the negative impact of mining and construction. Private consumption remains stable, in line with the performance of the labor market.

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.