Chile’s economy to grow between 1.75 and 2.25% this year, central bank estimates

Chile’s economic growth will be between 1.75 and 2.25 percent in 2022, with the economy still several quarters below potential growth in the face of global inflationary pressures, the central bank forecast Wednesday.

According to the monetary policy report for September, the institution also revised upward its annual inflation forecast for 2022, from an estimated 10 percent last June to 12 percent this month.

It said much of the revision was due to “accumulated volatile price surprises and the recent depreciation of the peso.”

Inflation is expected to fall next year and reach the target range of 3 percent in 2023, with price increases slowing from previous months and economic activity and demand declining for several quarters.

Chile’s central bank decided in a split vote on Tuesday to raise its monetary policy rate for the tenth consecutive month to curb inflation.

The rate was raised from 9.75 percent to 10.75 percent, the highest since 1998.

According to official data, inflation stood at 13.1 percent year-on-year in July, the highest level in nearly three decades, driven by food prices.

In mid-2021, the central bank initiated a policy of raising the key interest rate in line with other central banks to counter global inflation.

Then, in a scenario of high consumption and liquidity due to household economic support during the pandemic, the institution decided to withdraw monetary stimulus to curb activity and demand in order to return to macroeconomic balance.

The latest projections in the Monetary Policy Report assume a decline in prices in the coming months and annual inflation that begins to fall next year.

“The Council is concerned about the risk of much more permanent inflation. If they materialize, they could lead to further tightening of monetary policy,” the report said.

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