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BCCh President Expects Single Digit Inflation In Second Quarter

CHILE
  • The central bank of Chile had used the overnight policy statement to pre-empt the tone of the March IPoM by highlighting that “the economy is adjusting more slowly than expected and inflation is taking longer to come down.”
  • Within the IPoM, the central bank stated that “for inflationary convergence to consolidate, among other factors, the resolution of the imbalances that have affected the economy in recent years should be considered, including a significant slowdown in consumption, the activity gap gradually turning negative and core inflation showing a clear downward trend.”
  • The Consumer price forecast for year-end 2023 was revised up a full percentage point to 4.6%, while year-end 2024 remained at 3%. Most recent commentary from BCCh President Costa shows that the board believe inflation will revert to single digits in the second quarter. “This correction stems from the higher levels of inflation of recent months —particularly its core component—, the slower adjustment of consumption and the activity gap closing later than expected.”
  • For GDP, forecasts for 2023 were revised up to between -0.50% and 0.50%, whereas for 2024, forecasts are now between 1% and 2%, compared to the 2%-3% window forecast in December.
  • The lower bound of the MPR corridor represents a scenario where the international context deteriorates more than expected, causing increased global risk and affecting financial conditions, world activity and commodity prices more intensely. In such context, a faster adjustment of the domestic economy could lead to a somewhat earlier reduction in inflation and of the MPR.
  • The following details were also released:
  • Current account balance forecast as percentage of GDP:
    • 2023: -4%; prior est. -4.9%
    • 2024: -4.1%; prior est. -4.1%
  • Domestic demand forecast:
    • 2023: -4%; prior est. -5.3%
    • 2024: 1.1%; prior est. 1.7%
  • Investment forecast:
    • 2023: -2.9%; prior est. -5%
    • 2024: -0.7%; prior est. -0.2%
  • Consumer spending forecast:
    • 2023: -3.8%, prior est. -5.9%
    • 2024: 0.9%, prior est. 2.5%
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