Tuesday September 03 2019
Chile Cuts Interest Rate By 50 Bps to 2%
Mario | mario@tradingeconomics.com

The Central Bank of Chile cut its benchmark interest rate by 50 bps to 2 percent at its 3 September 2019 meeting. The unanimous decision was backed by a 10 bps decline in headline inflation (2.2% YoY in July) and triggered by a worsening of the external economic scenario. Policymakers noted that activity, exports and domestic demand indicators came below expectations since the last meeting. They also mentioned that growth expectations for 2019 were revised down to 2.6 percent. They underscored that the convergence of inflation to target will probably take longer than expected, which justifies further monetary stimulus.

Excerpts from the Statement of the Central Bank of Chile:

The main development since the previous Meeting has been the worsening of the external scenario. Especially significant has been the escalating trade conflict between the United States and China, with an impact on other economies that are integrated into value chains and financial markets. Global activity continued to slow in an important group of economies, where the weakening of manufacturing stood out, while services activity remains dynamic. The deterioration is deeper for global trade volumes, which virtually stagnated, and for expectations indicators. The trade conflict is compounded by the greater likelihood of a non-deal exit of the United Kingdom from the European Union, various geopolitical risks and a severe deterioration of the situation in Argentina. In this context, monetary policy has become more expansionary globally, but still financial markets continue to show high volatility and risk aversion. Thus, further declines in interest rates were observed in the fixed-income market, together with stock market relapses, depreciation of most currencies against the dollar and widespread falls in commodity prices. Inflationary figures remain contained in many economies around the world. 


In the second quarter, domestic activity and demand growth disappointed expectations. GDP growth was influenced by one-off supply-side factors and a fall in manufacturing. On the expenditure side, less progress was made in private consumption, although some of the one-off factors that affected GDP also had an impact on consumption growth. This, in a context in which consumer expectations have deteriorated from early in the year and private salaried employment shows less dynamism. Investment grew more than anticipated, thanks especially to its PRESS RELEASE* [INF*RES*AS] construction and other works component, offsetting a lower-than-expected expansion of machinery and equipment. Exports performed worse than expected. In this scenario, economic growth expectations have been adjusted downwards. The August Economic Expectations Survey (EES) anticipates GDP growth of 2.6% for 2019, 3.1% for 2020, and 3.3% for 2021.

The Board’s decision considers that the economy’s performance of the second quarter and its outlook indicate that inflation will take longer to converge to the target, calling for a stronger monetary stimulus. It also estimates that further stimulus might be required, which will be evaluated in the upcoming meetings in light of the evolution of the macroeconomic scenario. With that, the Board reiterates that it will conduct monetary policy with flexibility, so that projected inflation stands at 3% over the two-year horizon.





Monday August 19 2019
Chile Q2 GDP Growth Beats Forecasts
Banco Central de Chile | Stefanie Moya | stefanie.moya@tradingeconomics.com

The economy of Chile grew 1.9 percent year-on-year in the second quarter of 2019, following a 1.6 percent expansion in the previous period and beating market expectations of 1.8 percent. Growth was mainly boosted by the services sector namely personal services, real estate and business while the mining sector recovered after shrinking in the first quarter.

On the expenditure side, fixed investment grew at a faster pace (4.8 percent from 3.2 percent in Q1) boosted by construction (6.4 percent from 2.8 percent) while machinery and equipment slowed (2.0 percent from 3.9 percent). Meanwhile, growth moderated for household consumption (2.3 percent from 3.2 percent) and government spending (2.2 percent from 3.2 percent. Also, decline was observed for both exports (-3.2 percent from -2.0 percent) and imports (-3.5 percent from 1.4 percent).

On the production side, the mining activity grew 0.2 percent recovering from a 4.2 percent contraction in Q1 as copper production grew 0.6 percent (-3.3 percent in Q1). Additionally, output rebounded in fishing (5.5 percent from -3.2 percent); and utilities (0.7 percent from -0.6 percent). Also, faster growth was recorded in real estate (3.5 percent from 3.2 percent); construction (4.2 percent from 3.0 percent); and restaurants & hotels (2.4 percent from 1.4 percent) while business services advanced at the same pace (3.2 percent). Meanwhile, output contracted in manufacturing (-1.1 percent from 1.1 percent), mainly due to food (-3.6 percent from 0.2 percent), cellulose & paper (-2.7 percent from 0.9 percent), and textiles, clothing, leather and footwear (-10.4 percent from -9.0 percent). In addition, growth slowed in internal trade (1.5 percent from 2.4 percent); transport (3.7 percent from 4.2 percent); communication and information (2.1 percent from 2.9 percent); financial services (4.7 percent from 5.9 percent); and personal services (3.1 percent from 3.7 percent).   

On a seasonally adjusted quarterly basis, the economy advanced 0.8 percent, after stalling in the prior quarter.




Friday July 19 2019
Chile Keeps Interest Rate at 2.50%
Central Bank of Chile |Stefanie Moya | stefanie.moya@tradingeconomics.com

The Central Bank of Chile kept its benchmark interest rate unchanged at 2.50 percent at its July 18th 2019 meeting. Policymakers noted higher risks associated with the timely convergence of inflation to the target over the policy horizon, mainly due to cost of services and surrounding the future evolution of activity and demand, amid external uncertainty. The Committee said that will extend the current monetary stimulus, if necessary, and added that they will continue to conduct monetary policy with flexibility, so that projected inflation stands at 3 percent in the two-year horizon.

Statement by the Central Bank of Chile:

Regarding activity and demand, the information at hand for the second quarter points to somewhat less than expected dynamism, partly due to poor performance of mining and some specific factors. Some qualitative background indicators suggest that additional downside risks may be expected for the coming months. About consumption, imports of consumer goods have slowed down and consumers’ expectations have deteriorated significantly (IPEC). The labor market shows no significant changes, the unemployment rate remains around 7% and various indicators point to increasing job creation. On the investment side, the favorable evolution of some elements related to business services contrasts with the moderation of sales of construction materials and business expectations (IMCE), which are still slightly below their neutral levels. On the other hand, exports contracted beyond expectations, partly reflecting the weakness of some trading partners. In this context, the growth expectations contained in the Economic Expectations Survey (EES) decreased for both this year and next.

The annual CPI variation remained at 2.3% in June, while core inflation (CPIEFE) continued to hover around 2% annually. Among core inflation components, it is worth noting the widespread drop in the prices of services, more closely linked to capacity gaps and labor costs. On the contrary, the goods component of the CPIEFE posted unexpected growth, although largely driven by tourist packages. As for inflation expectations, there is a decrease for both the end of 2019 and one year ahead. For two years ahead, while the EES median remained at 3%, the median of the Financial Brokers Survey dropped to 2.8%.

The Board considers that information accumulated since the publication of the last Monetary Policy Report reflects increased risks associated with the timely convergence of inflation to the target over the policy horizon. In particular, due to lower services inflation figures, whose persistence is high relative to other CPI components and the risks surrounding the future evolution of activity and demand, in a context of high external uncertainty. In case these tendencies persist, the Board estimates that it will be necessary to extend the current monetary stimulus, in a magnitude to be assessed in the next Monetary Policy Report. Accordingly, it reiterates its will to conduct monetary policy with flexibility, so that projected inflation stands at 3% in the twoyear horizon.


Friday June 07 2019
Chile Central Bank Surprises with 50-Bps Cut
Mario | mario@tradingeconomics.com

The Central Bank of Chile cut its benchmark interest rate to 2.50 percent at its 7 June 2019, surprising market expectations of no change at 3.0 percent. The decision was unanimous. Policymakers were concerned by the evolution of global trade policy uncertainty and in turn growth prospects. They also warned about subpar domestic growth. Inflation jumped to 2.3 percent in May from 2.0 in April, mostly explained by a climb in electricity prices. Policymakers underscored that the output gap was updated to incorporate, among other factors, immigration factors.

Statement by the Central Bank of Chile:

Regarding the evolution of the external macroeconomic scenario, the main developments of the last month have revolved around the trade conflict, which has permeated other areas of the US-China relationship, plus other US trading partners. Fears that this may lead to a deterioration of the world economy have affected asset valuation, with falls in stock markets and long-term interest rates. Besides, the dollar has appreciated globally and commodity prices have dropped, copper included. In recent days, global financial markets have shown some improvement, hand in hand with signals coming from the central banks of developed countries about their will to boost the monetary impulse. Partial second-quarter inflation and activity data have been below market expectations. It is worth noting the situation of the labor market, manufacturing production and prospects. This coincides with a significant slowdown in global trade, that even posted annual contractions in some months.

With respect to local financial markets, external developments have been transmitted through the exchange rate, stock prices and the fixed-income market. Local risk indicators have also shown some increase, but remain contained. Market prices have factored in a lower MPR. Meanwhile, lending rates have declined recently, and a number of them are at their all-time lows.

The publication of first-quarter National Accounts confirmed lower-than-forecast activity growth, because of a poor performance of some more volatile lines related to natural resources, and mining. As for demand, the deceleration of machinery and equipment investment and exports stood out, both falling short of expectations, coinciding with the worsened external scenario during recent quarters and inventory build-up that failed to reverse as expected. Consumption brought no surprises, with a strengthened habitual component. April’s Imacec revealed an improvement of the mining sector and non-mining growth that remained above 2% annually.

Annual CPI inflation —measured using the 2018=100 benchmark base— rose to 2.3% in May (2% in April). As expected, the month’s inflation rate (0.6%) was largely the result of the increase in electricity rates. The CPIEFE stayed near 2% annually. Private inflation expectations available at the time of the Meeting show no big change. For the end of this year and one year ahead they stand somewhat below 3% annually, and remain in the neighborhood two years ahead.

On this occasion, the Board also considered the updating of the structural parameters that are used to evaluate the state of the economy, its outlook, and the calibration of monetary policy, the details of which will be included in the June Monetary Policy Report to be released next Monday at 8:30 hours. Most importantly, this allowed to quantify the effects of the massive immigration of recent years on trend and potential growth. The Board estimates the former in the 3.25% to 3.75% for the period 2019- 2028, and the latter, around 3.4% for 2019-2021. In both cases this means an increase of 25 basis points with respect to earlier estimates. This, combined with the lower growth of the first quarter, results in a widening of the activity gap. Meanwhile, the neutral MPR has been revised downward by 25 basis points, partly reflecting the drop in neutral rates around the world. Forecasts included in the Report suggest that in 2019 GDP growth will be between 2.75% and 3.5%, and between 3% and 4% in 2020 and 2021, in line with a recovery of growth in the second half of this year and increased potential growth. These projections consider the monetary policy decision of this Meeting.


Monday May 20 2019
Chile Q1 GDP Growth Weakest in Nearly 2 Years
Banco Central de Chile | Stefanie Moya | stefanie.moya@tradingeconomics.com

The economy of Chile advanced 1.6 percent year-on-year in the first quarter of 2019, easing from a 3.6 percent expansion in the previous period and missing market expectations of 1.8 percent. It was the weakest growth rate since the second quarter of 2017, as mining; fishing and agricultural activity shrank.

Year-on-year, both household consumption (3.2 percent from 3.6 percent in Q4) and fixed investment slowed (2.9 percent from 5.6 percent), of which investment in machinery and equipment (3.3 prcent from 12.1 percent). On the other hand, government spending increased 1.7 percent, faster than a 1.3 percent rise in the prior period. Net external demand contributed negatively to growth, as exports dropped 1.8 percent (vs 3.3 percent in Q4), mostly due to refined copper, other minerals and fruits while imports went up 2.3 percent (vs 6.6 percent in Q4), driven by iron and steel and petroleum.

On the production side, mining activity contracted 3.6 percent, after grewing 1.3 percent in the last quarter of 2018, mainly due to copper production (-2.7 percent from 1.9 percent). Also agriculture (-1.2 percent from 5.7 percent); fishing (-3.1 percent from 13.9 percent); and utilities (-0.6 percent from 4.2 percent) shrank. Additionally, slower growth was recorded in manufacturing  (0.9 percent from 3.6 percent), mainly due to food (0.5 percent from 5.6 percent), wood and furniture (-2.3 percent from 0.5 percent), and textiles, clothing, leather and footwear (-8.8 percent from -4.8 percent); construction (2.8 percent from 3.1 percent); internal trade (2.6 percent from 3.8 percent); restaurants & hotels (1.3 percent from 2.4 percent); transport (4.2 percent from 5.1 percent); communication and information (2.6 percent from 3.9 percent); financial services (5.8 percent from 6.0 percent); real estate (3.2 percent from 3.3 percent); and personal services (3.3 percent from 3.9 percent). Meanwhile, business (3.1 percent from 2.9 percent) and utilities (4.2 percent from 2.7 percent) advanced further. 

On a seasonally adjusted quarterly basis, the economy showed no growth, after expanding 1.3 percent in the prior quarter.


Friday May 10 2019
Chile Holds Interest Rate at 3%
Central Bank of Chile | Mario | mario@tradingeconomics.com

The Central Bank of Chile held its benchmark interest rate at 3 percent at its May 9th 2019 meeting, as widely expected. The decision was unanimous. Policymakers said that the inflation outlook requires keeping the monetary stimulus for an extended period of time. The Committee added that they will continue to conduct monetary policy with flexibility so the inflation rate stands at 3 percent over the next two years.

Statement by the Central Bank of Chile:

The local financial market has seen a decline in the stock market and a depreciation of the peso, in line with the global trends of recent days. Medium- and long-term interest rates have shown no major movements in the most recent past, despite some decline after the last Meeting. Credit expansion, costs and lending standards, according to the March Bank Lending Survey, present no big change, while demand for credit is perceived as having lost some dynamism in the segments of consumers and large companies.

Preliminary first-quarter data suggest that GDP grew less than forecast in the March Monetary Policy Report. This would respond to reduced mining activity and the performance of some of the more volatile sectors. Conversely, all other sectors have performed in line with expectations, particularly those linked to services and investment. About the latter, although imports of capital goods have shown greater volatility, the outlook remains favorable as can be derived from the evolution of construction activity and the upward revision of the Capital Goods Corporation's latest survey. On the consumption side, there are no signs of a significant switch in the trend, as the slowdown in durable goods consumption is offset by the strengthening of services. In the labor market, the various sources of information point to stronger growth in salaried employment. Meanwhile, the unemployment rate remains around 7% and nominal wages accelerated in annual terms, reflecting the rise in the minimum wage. 

Annual CPI inflation—measured with the 2018=100 base benchmark series—increased with respect to the beginning of the year, standing at 2% in April. This responds to a large extent to the higher incidence of foodstuffs and fuels. Meanwhile, the CPIEFE has continued to fluctuate around 2% y-o-y. Private inflation expectations available at the time of the Meeting show slight changes. For this year’s end and one year ahead, they stand somewhat below 3% annually, where they are expected to remain in the two-year horizon. 

The Board’s decision considered that information accumulated in the last month does not modify significantly from the evaluation contained in the March Report. Thus, it estimates that the lower level and outlook of inflation require keeping the monetary stimulus still for an extended period of time. The course of the MPR normalization necessary for the convergence of inflation within the policy horizon will be subject to a new appraisal in the June Report. Accordingly, the Board reiterates its will to conduct monetary policy with flexibility, so that projected inflation stands at 3% over the two-year horizon.



Friday March 29 2019
Chile Holds Policy Interest Rate at 3%
Central Bank of Chile | Joana Ferreira | joana.ferreira@tradingeconomics.com

The Central Bank of Chile held its benchmark interest rate at 3 percent during its March meeting, as widely expected, saying rates are expected to remain at current levels for a longer time amid low inflation expectations and global growth slowdown.

Excerpts from the Central Bank of Chile's press release:

On the external front, since the previous meeting growth forecasts for the main economies have continued to be downgraded. In this scenario, the Federal Reserve and the European Central Bank have reinforced their stance for a more expansive monetary policy while the Chinese authorities have added new stimulus measures. In addition to adjustments to its balance sheet, the Federal Reserve also announced that it would not raise the federal funds rate this year and that the direction of its next move cannot be foreseen with clarity. Even though all these announcements have significantly reduced long term interest rates, tensions in international financial markets have reappeared. The yield curve has inverted, the dollar has appreciated globally and news fears about the performance of some emerging economies whose economic fundamentals are perceived as weak have arisen. Commodity prices have been less affected. Specifically, the current price of copper is still above the one observed at the time of January’s meeting.

Regarding local financial conditions, the peso, as the majority of emerging market currencies, experienced significant fluctuations since the previous meeting. Measures of domestic financial risk remained contained. Aligned with global trends, the stock market and interest rates fell. In the local bank credit market, loans continued growing in real terms while lending rates remain low in historical perspective.

The annual growth of the CPI – according to the base 2018=100 reference series- is at 1,7% in February (CPIEFE: 2%), below what was forecasted in the last Monetary Policy Report. Beyond the direct impact of the new CPI basket and methodology, a number of macroeconomic phenomena seem to explain this difference. A lower than expected exchange rate pass-through and more competition in some markets are among them. An evaluation that capacity slack is bigger than previous estimations, what to a significant extent appears to be related to the effects of immigration in the labor force, is another factor. In the last months, private sector inflation expectations for the short term have been reduced while the ones for December 2019 have seen a smaller reduction. At the two-year horizon, they are around 3%.

The Board’s decision considered that, according to the analysis in the Monetary Policy Report and the recent data, the lower level of inflation and its perspectives, require keeping the monetary stimulus for a longer time. Notwithstanding, it still estimates that towards the medium term it will be necessary to resume the normalization of the monetary policy rate to assure the convergence of inflation in the policy horizon. With this, the Board reaffirms that it will proceed gradually and cautiously as has been stated and reiterates its commitment to conduct monetary policy with flexibility so that projected inflation stands at 3% over the two-year horizon.


Monday March 18 2019
Chile GDP Growth Beats Forecasts in Q4
Banco Central de Chile | Stefanie Moya | stefanie.moya@tradingeconomics.com

The economy of Chile advanced 3.6 percent year-on-year in the fourth quarter of 2018, following a downwardly revised 2.6 percent growth in the previous period and beating market expectations of a 2.9 percent expansion. Growth was mainly driven by a rebound in mining activity.

Year-on-year, fixed investment advanced further (5.6 percent from 4.9 percent in Q3), mostly boosted by investment in machinery and equipment (12.1 percent from 8.4 percent). Meanwhile, both household consumption (3.6 percent from 4.1 percent in Q3) and government spending (1.3 percent from 1.9 percent) slowed. Additionally, net external demand contributed negatively to growth, as imports rose 6.6 percent (vs 8.0 percent in Q3), led by purchases of automobiles and industrial and mining machinery while exports advanced at a slower 3.3 percent (vs 1.3 percent in Q3), driven by sales of copper, salmon and fruits.

On the production side, mining activity grew 1.3 percent, after shrinking 1.9 percent in Q3, mostly boosted by copper production (1.9 percent from -1.7 percent). Also, the manufacturing sector expanded at a faster pace (3.6 percent from 1.0 percent), mainly due to food (5.6 percent from 1.5 percent), metallic, machinery and equipment and others (2.0 percent from -1.1 percent); chemicals, rubber and plastic (4.7 percent from 0.2 percent) and paper and printing (7.2 percent from 3.0 percent). Additionally, faster growth was recorded in internal trade (3.8 percent from 2.9 percent); agriculture (5.7 percent from 4.0 percent); fishing (13.9 percent from 3.0 percent);  financial services (6.0 percent from 4.5 percent); business (2.9 percent from 2.2 percent);  personal services (3.9 percent from 3.8 percent); restaurants & hotels (2.4 percent from 1.5 percent); transport (5.1 percent from 3.0 percent); communication and information (3.9 percent from 3.6 percent); construction (3.1 percent from 3.0 percent); and utilities (4.2 percent from 2.7 percent). Meanwhile, real estate activities growth eased (3.3 percent from 3.6 percent).

On a seasonally adjusted quarterly basis, the gross domestic product expanded 1.3 percent, after a downwardly revised 0.2 percent gain in the prior quarter. 

Considering full 2018, the Chilean economy grew 4.0 percent.



Thursday January 31 2019
Chile Hikes Interest Rate to 3%
Central Bank of Chile | Mario | mario@tradingeconomics.com

The Central Bank of Chile raised its benchmark interest rate by 25 bps to 3.00 percent on January 30th 2019, as widely expected. The decision was unanimous. Policymakers said that the decision considered the evolution of macroeconomic conditions and reaffirmed its commitment to conduct the monetary policy with flexibility so the inflation rate stands at 3 percent over the next two years.

Statement from the Central Bank of Chile:

Internationally, incoming data point to growth moderating in the world economy beyond forecasts, accompanied by volatile financial markets and persistent political and economic risks. In the developed world, economic expectations have deteriorated. Conjunctural Eurozone growth data again brought negative surprises, while China's activity indicators moderated further, prompting its authorities to announce new stimuli. Meanwhile, recent US data remains dynamic. Inflation slowed in most countries as a result of the drop in oil prices in the last quarter of 2018. 

In this context, the main central banks have signaled a more gradual normalization of their monetary policies, which market prices have internalized. Long-term interest rates have fallen in several economies, stock markets have risen from end-of-2018 levels and capital flows have returned to emerging countries. The oil price has recovered partially in 2019 so far, while copper has fluctuated around USD 2.7 per pound. 

Regarding local financial conditions, the peso continued to fluctuate significantly, but its current value in terms of US dollars shows little variation from the last Meeting. This, in a context in which the local risk indicators remain contained, interest rates have fallen slightly to converge with the global trend, while the stock market (IPSA) has aligned with the increases in Latin American stock markets. In the credit market, annual credit growth accelerated towards the end of 2018, especially in consumer and commercial loans. Interest rates remain low from a historical perspective.

December’s monthly inflation was negative (-0.1%), affected mainly by a drop in the more volatile items (i.e. energy and foodstuffs). With this, in y-o-y terms, CPI inflation was 2.6% and for CPIEFE was 2.3%, both figures slightly below the December Report’s estimates. Those prices most sensitive to the activity gap, including unregulated services in the CPIEFE, continued to rise steadily. Inflation expectations for December 2019 declined to 2.8%, while expectations two years out remain around 3%.

The Board’s decision considered that the evolution of macroeconomic conditions continues to warrant a gradual withdrawal of the monetary stimulus, in line with what was foreseen in the last Monetary Policy Report. At the same time, it reiterated that it will proceed with this process gradually and cautiously. In particular, the next Monetary Policy Report will pay special attention to the evolution of the international scenario and its implications for the convergence of inflation to the target. Accordingly, the Board reaffirms its commitment to conduct monetary policy with flexibility, so that projected inflation stands at 3% over the two-year horizon.


Tuesday December 04 2018
Chile Holds Interest Rate at 2.75%
Mario | mario@tradingeconomics.com

The Central Bank of Chile left its benchmark interest rate unchanged at 2.75 percent on 4 December 2018, matching market expectations. The decision was unanimous. Policymakers mentioned that weaker global and domestic growth is expected ahead and underscored that the peso and equities remain highly volatile. Nonetheless, a hawkish stance prevailed, as the minutes suggested higher rates to normalize the previous easing cycle. They also noted that while oil prices have plunged recently, prices of most commodities remain stable. As for consumer prices, policymakers underscored that inflation expectations declined since the last meeting. The annual inflation rate in Chile eased to 2.9 percent in October 2018 from 3.1 percent in the previous month.

Minutes from the Central Bank of Chile:

Externally, the data continues to confirm that global growth is moving to a stage of lower expansion than in previous years. Since the previous Meeting, less auspicious activity figures have been noted in the Eurozone and China, a downward adjustment in the prices of risky assets in developed markets and a market perception that the process of monetary normalization in the United States will be more limited next year. Also worth noting is the significant drop in the price of oil, which reduces some short-term inflationary pressures, in a context where the other commodity prices show no big changes. The Brexit is nearing definition, while the trade conflict between the US and China seem to have opened some formal room for negotiating.


The Chilean peso and stock market continued to fluctuate significantly in recent weeks, while longer-term interest rates decreased in line with events in the developed markets. Risk indicators posted minor changes. The credit market continues to be characterized by low interest rates and higher growth in commercial and consumer loans.

Third-quarter 2018 national accounts showed a slowdown in activity beyond expectations, caused mostly by mining- and manufacturing- specific factors. In the latter case, the calendar effect took a toll on activity in September, which was fully undone October according to sectoral indicators. On the expenditure side, the data continues to point to significant momentum from investment and somewhat slower from consumption, although October’s sectoral retail data suggests a strengthening of the latter. The revision to remuneration indexes by the INE and the consideration of the effect of immigration on the behavior of employment confirm the vision of a labor market that evolves in line with the growth pace observed since mid-2017. For the period 2018-2020, the market outlook (EES) points to an annual GDP expansion of 4% this year and 3.5% in 2019 and 2020.

October’s inflation (0.4%) was in line with forecasts, so annual CPI inflation decreased to 2.9% and CPIEFE inflation remained at 2.1%. The prices that are more sensitive to the activity gap, such as non-regulated utility rates in the CPIEFE, continue to accelerate steadily. At shorter terms, private inflation expectations have fallen in line with the lower international prices of oil and fuels, while at two years they remain around 3%.

The Board’s decision considered that the analysis contained in the December Monetary Policy Report, and the data available at the statistical close, confirm that the evolution of macroeconomic conditions make it necessary to reduce the monetary stimulus, a process that will continue to be implemented gradually and cautiously. Key to this judgment is the evaluation of the size of capacity gaps compared to the magnitude of the monetary stimulus: while the former have narrowed and inflation has increased, monetary policy remains highly expansionary. With this, the Board reaffirms its commitment to conduct monetary policy with flexibility, so that projected inflation stands at 3% over the two-year horizon.