SANTIAGO: Chile's central bank flagged the possibility of future interest rate cuts and revised downward its forecast for 2017 economic growth and inflation in its highly anticipated quarterly Monetary Policy Report released on Monday.
The bank forecast 2017 gross domestic product growth of between 1.5 and 2.5 percent, versus its previous forecast of 1.75 percent to 2.75 percent growth. It said the economy of the world's top copper producer would expand 1.5 percent in 2016 in what would be the lowest growth since a 2009 recession.
Annual inflation is now expected to end 2017 at 2.9 percent, from a previous view of 3.1 percent. Inflation is seen remaining on the lower end of the central bank's 2 percent to 4 percent tolerance range for most of 2017 before returning to the 3 percent target toward the end of the year, the bank said.
Regarding the benchmark interest rate, the bank said its base case is similar to that in various market forecasts, which point to expectations of two 25-basis-point rate cuts over the two-year policy horizon.
"With that, we assure that monetary policy will continue to be expansive throughout the policy horizon," said the bank.
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