Chile's economy again grew at a subdued pace in the third quarter but slightly beat expectations, data showed on Friday, likely allowing monetary policy makers to leave the benchmark interest rate on hold for now. Gross domestic product grew 0.6 percent in the third quarter versus the second quarter in seasonally adjusted terms, according to central bank data.
The bank said that GDP growth in the third quarter was helped by strong activity in transport, retail, and "personal services." Growth was capped, however, by weakness in manufacturing, utilities, and construction. Third-quarter GDP growth in the world's top copper exporter was 1.6 percent compared with a year earlier, slightly above the 1.4 percent expansion forecast in a Reuters poll.
"While GDP data released this morning showed that economic growth remained sluggish in the third quarter at 1.6 percent year-on-year, we still think it would take a further weakening of the economy - which seems unlikely - to convince policymakers to ease policy," said Capital Economics in a note to clients. Chile's central bank held its benchmark interest rate steady at 3.5 percent on Thursday, as expected, and maintained its neutral bias.
A recent cooling of inflation has boosted bets among analysts and traders that the bank will cut the key rate by 25 basis points in coming months, but a further weakening of the economy will likely have to be apparent before that materialises. "The outlook for the economy is still likely to be the deciding factor in policymakers' next move," Capital Economics said.
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