The issuing institute reiterated that there are clear possibilities of a global recession. In this sense, he maintained that at the local level the GDP could vary between -1.0 and 0% in 2023.
In the Monetary Policy Report (IPoM) of June 2022, published this Wednesday by the Central Bank, it was pointed out that inflation in Chile has continued to climb, reaching its highest level in decades.
“The main driver for the upside continues to be the significant increase in demand in 2021″the Bank said, alluding to the fact that this went hand in hand with AFP withdrawals and state transfers that were made as Crisis Exit Aid (EFI).
However, the inflationary scenario has worsened due to global factors: rising commodity, energy and food prices.
Although there has been an intense monetary policy reaction from various central banks in the short term, the issuing institution pointed out, increased the likelihood of a global recession in the medium term.
In the report, the Central Bank clarified that the remaining liquidity from the stimulus measures adopted in 2021 will continue to support consumption in the immediate future.
“However, most of its fundamentals point to it weakening in the second half of the year. In the labor market, job creation continues, but at a slower pace than in previous months and with lower real wages, in a context where the unemployment rate remains below 8%,” he said.
He added that the financial conditions faced by households have become more restrictiveboth due to rising interest rates and increased demand for credit.
In this context, coinciding with the effect of inflation on household purchasing power, “consumer expectations have deteriorated sharply in recent months, worsening the perception of employment, inflation and the purchase of goods”.
The report explains that, in the central scenario, it is estimated that the annual change in the CPI will continue to increase to values slightly below 13% during the third quarter. From there, it will start to decline, ending 2022 around 10%.
GDP, on the other hand, would have an annual variation between 1.5 and 2.25% this year, between -1.0 and 0% in 2023 and between 2.25 and 3.25% in 2024.
The World Bank, for its part, has again forecast in the last hours a slowdown in Chile’s growth both for this year and for 2023: 1.7% and 0.8%, respectively; plus a 2% expansion for 2024.
The high level of inflation and the greater persistence associated with its main determinants have necessitated a more restrictive monetary policy.
This led the Central Bank Board to raise the MPR to 9%, considering that to ensure the convergence of inflation to 3% over the two-year horizon, additional adjustments of a lesser magnitude will be necessary.
“In any event, risks remain highin particular because of the level reached by inflation and its greater persistence”, underlined the issuing institute.
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