Santiago — Chile’s economy chalked up its fifth consecutive decline in year-on-year terms. The monthly index of economic activity (Imacec), a benchmark of GDP, contracted 1% in June against the same month of 2022, shrinking less than the 1.4% estimated by the median of analysts in a Bloomberg survey.
However, the index increased 0.5% compared to the previous month, Chile’s central bank reported on Tuesday, and which also exceeded expectations among those consulted by Bloomberg, whose average prediction was a a monthly drop of 0.1%.
The annual variation of the Imacec was explained by the fall registered by commerce and industry, partly compensated by other goods, while the growth of the index in seasonally adjusted terms was determined by the performance of mining.
The mining sector expanded 4.5% in June with respect to the previous month, affecting the economic activity index by 0.6%. To a lesser extent, taxes on products and other goods also had a positive influence.
Interest rate cut
On Friday, the central bank initiated a cycle of cuts in the benchmark interest rate, bringing it down to 10.25% from 11.25%. The decision was adopted unanimously by the issuing institute’s board of directors, which noted that total and core inflation fell faster than expected in the most recent monetary policy report.
The consumer price index (CPI) reached 7.6% year-on-year in June, continuing with its moderating trend after reaching 14.1% in August 2022; at the same time that the economy is stagnant and some forecasts expect it to close 2023 with one of the worst performances in Latin America.
The central bank’s board estimated that, in the short term, the monetary policy rate will accumulate a reduction greater than that considered in the central scenario of monetary policy published in June, but warns that the magnitude and temporality of the process of cuts will consider the macroeconomic evolution and its impact on the course of inflation.
