Itaú BBA - The recovery continues

Scenario Review - Chile

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The recovery continues

August 9, 2018

Despite the favorable outlook, rising trade tensions could hamper copper prices and restrict the growth recovery.

For the full version with all charts and tables, please open the attached pdf file 

Activity strengthened in 2Q18. Both investment and private consumption have gained traction, despite trade war risks. We see growth in Chile increasing to 3.8% this year (versus 1.5% last year) and 3.5% in 2019.

The recent weakening of the currency and higher oil prices are lifting inflation temporarily. As the output gap narrows and inflation expectations remain well-anchored, we see inflation ending the year at 2.8%, up from 2.3% last year, returning to the 3% target next year. 

Recovering activity and higher inflation are unlikely to trigger rate hikes before those indicated by the central bank (first hike by the end of this year), as trade war risks remain prominent, the output gap is negative and core inflation still low. We see the policy rate reaching 3.75% by the end of 2019 (2.5% currently). 
 

João Pedro Bumachar
Vittorio Peretti
Miguel Ricaurte


For the full version with all charts and tables, please open the attached pdf file 



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