The central bank issued its revised forecast a day after slashing its benchmark interest rate by 75 basis points to 6.5% and signaling further rate cuts, whose size and timing will depend on the “evolution of the macroeconomic scenario and its implications for the trajectory of inflation.”
Chile’s economic activity has surprised to the upside in early 2024, overshooting expectations in January and February.
Inflation in the Andean country, the central bank noted in its monetary policy report on Wednesday, has declined sharply towards the 3% target after peaking in 2022, largely due to reduced domestic spending and a narrowing activity gap.
This has helped correct “large” macroeconomic imbalances observed in recent years, the central bank noted, with two-year inflation forecasts remaining steady at 3% for multiple consecutive quarters.
The central bank said it now projects headline inflation to end this year at 3.8% in light of the local currency’s recent depreciation, up from a previous estimate of 2.9%, but still sees it converging to the target within its two-year policy horizon.
It also projected GDP growth in 2025 and 2026 to range between 1.5% and 2.5%, indicating a convergence to the economy’s potential growth rate.
The projection for next year came in slightly below the previous growth forecast of 2% to 3%.
The central bank in the world’s largest copper producer also estimated copper prices to average $3.85 per pound in 2024, up from a previous forecast of $3.80 per pound.
Source: Economy - investing.com
