Chile maintains rate and neutral policy guidance

     Chile’s central bank left its monetary policy rate unchanged at 2.50 percent, as expected, and repeated its neutral guidance by saying that any future changes in policy would depend on the implications of domestic and external conditions on the inflationary outlook.
      The Central Bank of Chile has cut its rate four times this year by a total of 100 basis points and following its most recent cut in May it also signaled a neutral stance by staying future changes would depend on the inflationary outlook.
     Today the central bank said inflation in May had eased to 2.6 percent from 2.7 percent – the lowest since November 2013 – and inflation expectations remained near its target of 3.0 percent, plus/minus 1 percentage point.
      The bank also said partial data for activity and demand in the second quarter of the year were consistent with its forecasts, reflecting the negative impact of mining and construction while private consumption remains stable.
       Earlier this month the central bank cut its 2017 growth forecast to between 1.0 and 1.75 percent from a previous forecast of 1-2 percent due to weak performance by mining and construction.
        The central bank’s president, Mario Marcel, also said on June 5 he did not expect changes to monetary policy would be necessary as the policy stance was now expansive and past rate cuts should be allowed to filter down into the economy.
        For 2018 the central bank forecast growth of 2.5 – 3.5 percent, up from a previous 2.25 – 3.25 percent as mining investment is expected to bounce back.