Chile cenbank keeps key rate unchanged on high GDP growth
Chile's GDP grew 1.6% year-on-year in Q3, the same figure as in Q2, putting growth for January-September at 1.8%, the central bank reported.
The result was above the expectations of analysts consulted in the central bank's monthly survey, who had projected 1.3% growth.
In seasonally adjusted terms GDP grew 0.6% quarter-on-quarter compared to -0.4% in Q2.
Growth in the quarter was explained mainly by the performance in personal services, which was up 6.6% year-on-year and, to a lesser extent, commerce and transport, which saw activity increase 3.1% and 5.0%, respectively.
In contrast, activity in both the manufacturing industry and construction sector declined 1.4%, while the electricity, gas & water sector was down 3.7%, compared to an increase of 5.2% the previous quarter.
"The result is due to a contraction in the electricity sector, partially offset by the dynamism in gas activity. The water sector expanded, but it had a marginal impact," read the central bank release.
The telecom sector contracted 0.1%, compared to a 0.6% drop the previous quarter, affected by the limited activity in mobile services and a fall in fixed lines, "in contrast to the dynamism in services related to cable TV and internet," the monetary authority added.
Mining activity completed its fifth consecutive quarterly decline with a drop of 0.8%. Activity in copper mining and non-copper mining fell 0.5% and 3.5%, respectively. Activity in copper mining reflected the lower ore grades, as well as unfavorable weather conditions and labor strikes that affected some of the main mining companies operating in Chile, according to the central bank.
CENTRAL BANK HOLDS KEY RATE
As was widely expected, the central bank maintained its key interest rate unchanged at 3.50%.
In its release, the central bank highlighted that October inflation had surprised to the downside, with cumulative 12-month inflation declining to 2.8%. Short-term inflation expectations shrank, while economic activity and demand in Q3 "showed a performance in line with the monetary policy report [IPom]."
"The outlook for the economy is still likely to be the deciding factor in policymakers' next move," according to UK-based analysis firm Capital Economics, adding that "policymakers will have known this at the monetary policy meeting and, given that it was in line with their expectations, it appears that it will take a further weakening of the economy that we don't expect to trigger rate cuts."
"All in all, while the risk of interest rate cuts over the next year remains, we still think that policymakers are more likely to leave policy unchanged for some time. Our forecast is for the benchmark interest rate to be left on hold at 3.50% until 2018."
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