Central Bank of Chile to review stance days out from election

Today the Central Bank of Chile will decide whether to lower the country’s interest rate or maintain it at 2.5% for the sixth month straight.

After a quarter-century of impressive expansion, Chile’s economy has stagnated in the past 4 years amid rising commodity prices, growing by less than a percent in 2016. Despite dropping the interest rate a point since early 2017, the 1.8% inflation remains under the 2-4% target.

Dissatisfaction with economic sluggishness has built support for the presidential campaign of right-wing businessman and former president Sebastián Piñera. The prospect of a business-friendly Piñera victory over the ruling centre-left coalition has encouraged investors, raising the Chilean stock market 28%.

However, some positive economic indicators have emerged. Growth is expected to accelerate to 2.6% in 2018, and employment remains at a modest 6.7%. With inflation low, but not abysmal, the central bank is likely to maintain interest rates. Expect Chilean growth to rebound in the coming years, but still stay below its halcyon days of supercharged growth.