Scenario supports a start of the normalization cycle as soon as July
Despite the latest mobility restrictions, the vaccine advancement, and additional support measures mean risks for our forecast tilt to the upside.
Quarantine measures would hinder domestic activity in the short-term, but prospects for the rest of the year remain favorable.
Strong terms of trade and the vaccination roll-out could lead to growth above our current 6.5% forecast.
Improving sanitary conditions would favor the expected recovery ahead
A swift vaccination rollout could compensate a weaker start to 2021.
While support measures would boost inflation and growth in the short-term, the central bank will retain the monetary stimulus.
The transitory nature of the CPI increase is unlikely to change the central bank’s stance of stable rates at 0.5%
The reopening of the economy, pension payouts and a sentiment improvement are supporting the activity recovery.
Signs of a recovery likely prompted the guidance for higher rates in 2022.
Pension boost to consumption to lead to a midler GDP decline
An intensification of domestic lockdown measures will result in a deeper GDP contraction this year
The significant loosening of the labor market means the policy response may need to be stronger to prevent a permanent economic damage.
The reduced global demand, mobility restrictions and lingering domestic uncertainties led us to reduce our GDP forecast to a 3.7% activity contraction.
Caution on future rate moves will prevail, but Fed rate cuts in response to the expected global activity slowdown makes our call for 50 bps
The central bank will remain cautious regarding future rate moves in the short term
As the CLP recovers following the intervention program and a more upbeat global outlook, inflationary pressures may be more contained
Increased uncertainty hurt asset prices and expectations, leading to a large fiscal response and a robust FX intervention package.
Amid an uncertain domestic scenario, growth risks are tilted to the downside
Favorable August activity data lifts the growth outlook, but would not bring easing cycle to an end.
The added monetary and fiscal stimulus measures would support some recovery next year
We expect a 25-bp rate cut in the September meeting, but the likelihood of a larger cut has increased following the recent escalation in global trade tensions.
Momentum gains are unlikely to persist as private sentiment slumps, the labor market weakens and the global slowdown consolidates.
The effects of an unresolved trade war on Chile will lead to further interest rate cuts
Low inflation, weakening activity, the Fed’s looser policy stance and lower global growth suggest that there is no need to remove stimulus in the near term.
International and domestic factors provide room to retain monetary stimulus for longer
Short-term uncertainty over inflation dynamics and still elevated external risks support a more cautious central bank
We revised our growth forecast to 3.2% for this year (from 3.5%), due in part to uncertainty over global trade negotiations and weak data at the end of 2018
The consolidation of the activity recovery continues, but there are still headwinds
Dipping inflation in the coming months and unconsolidated economic recovery means a hike in January not a given.
Amid mixed activity and inflation signs, gradual hiking would be prudent
Tightening cycle will be gradual, particularly given the still-loose labor market and low underlying inflation
The proposed tax reform will face a tough passage in congress
Despite the favorable outlook, rising trade tensions could hamper copper prices and restrict the growth recovery.
The strong start to the year puts an upside bias to the activity outlook
Investment is benefitting from improved sentiment and higher copper prices
With a broad-based activity recovery and still-low inflation, there is no rush for rate hikes
With improved domestic conditions, the main risks to the expected recovery come from abroad.
We now expect GDP growth of 3.6% this year, with risks tilted to the upside
Stronger global growth, high copper prices, recovering private sentiment and expansionary monetary policy will boost a recovery in activity
We have improved our growth outlook on more favorable external and domestic conditions.
Higher-than-expected inflation is putting pressure on the Central Bank
Activity recovery for 2018 requires a private sentiment improvement.
Limited inflationary pressures mean that we cannot rule out additional rate cuts.
Recovery gains traction
With weak activity and low inflation, the upcoming Inflation Report would point to more easing.
Weak growth and a stable currency have led to subdued inflationary pressures.
Weak activity will likely show some improvement through this year as the mining drag subsides.
Government expenditure prevented a technical recession in 1Q17, and a meaningful recovery remains elusive.
The central bank would implement another 25bps rate cut before the end of 2Q17.
We still expect a 100-bp easing cycle, taking the policy rate to 2.5% by yearend
A treacherous year will call for more policy support.
Monetary loosening would continue amid elusive growth.
We expect a 100bps loosening cycle this year.
Low growth and disinflation will lead to rate cuts beginning in January.
Rate cuts next year would come amid a faster disinflationary process.
We now expect two 25-basis points rate cuts in 1Q16 amid faster disinflation and weak growth.
Despite weak growth, faster disinflation is needed to trigger rate cuts in 2017.
A bleak outlook for growth and disinflation could lead to a looser monetary stance next year.
We now expect GDP growth of 1.5% this year, below the 2.1% rate from last year.
Low copper prices, less fiscal support and pessimistic private-sector sentiment are weightening on activity.
Low commodity prices, less fiscal support and low confidence will continue to limit a recovery.
Weak growth, a stronger currency and falling inflation confirm our view of no rate hikes.
Low copper prices limit the room for fiscal policy and weigh growth down.
We reduced our 2016 growth forecast to 2.0%.
A less-intense depreciation and a sluggish economy would help to bring inflation down.
The entire process will extend into the next administration, easing political tensions.
Partial withdrawal of monetary stimulus amid a weaker economic recovery.
The economy remained weak during 2Q15, and lower copper prices have dampened the expectations for a significant recovery
We have reduced our 2016 forecast to 3.0% (from 3.2%).
Amid higher-than-expected inflation and lower-than-expected growth, we continue to anticipate unchanged policy rates both this year and in 2016.
We have reduced our growth forecasts to 2.5% from 2.8% for this year and to 3.4% from 3.5% in 2016.
President Michelle Bachelet announced that the government will start a constitutional reform process in September.
As a response to the worsened inflation outlook, the Central Bank introduced a tightening bias in the first Monetary Policy Report of the year.
We have revised our GDP growth-rate and inflation forecasts for 2015 to 2.8% and 3.0%, respectively.
the December indicators came in significantly better than expected.
Industry continues to perform poorly.
Chile’s 3Q14 GDP grew 0.8% from the previous year
Chile’s IMACEC (monthly proxy for GDP) fell 0.2% between August and September,
We expect a modest 0.5% year-over-year increase in August’s IMACEC (monthly proxy for GDP).
Chile’s economy weakened further in 2Q14.
The IMACEC (monthly proxy for GDP) contracted by 0.8% from May to June
The IMACEC (monthly proxy for GDP) increased by 0.6% from April to May
The economy once again grew at a below-trend pace in 1Q14.
The Chilean economy grew at a below-potential rate in 1Q14.
Investment led the deceleration in 4Q13.
Chile’s economic activity has continued to slow, led by investments.
Chile’s economy slowed substantially during the last quarter of 2013, bringing growth for the full year to 4.0%.
We maintain our GDP estimate at 4.2% for 2013, but we increased our 2014 forecast to 4.2% (from 4.0%).
Chile’s GDP was up 4.7% year over year during 3Q13, following 4.0% growth the previous quarter.
The Chilean peso has weakened, led by the earlier-than-expected start of the easing cycle.
We expect Chile’s GDP to grow 4.2% in 2013 and 4.4% in 2014.
Chile’s economy posted weak growth in 2Q13, but the number’s breakdown shows strong final demand growth.
The economy posted a below-expectation growth during the first half of the year.
We maintain our growth forecasts (4.5% and 4.7% for 2013 and 2014, respectively), but downside risks for activity are increasing.
We now expect Chile’s economy to grow by 4.5% this year and by 4.7% in 2014.