(Bloomberg) – The Central Bank of Chile said it is still uncertain when the interest rate hikes will start, due to factors such as an uneven recovery and a weak labor market.
Increased fiscal stimulus and reduced risks mean Chile’s economic outlook has “improved significantly” compared to March estimates, policymakers wrote in minutes of their May rate-setting meeting released on Monday. . Economic data for April will be key in determining how resilient the recovery was to quarantines from the virus, they wrote.
“All the Directors agreed that the uncertainty about the start of the normalization process continued to be high,” they said. Despite higher demand and activity, other factors such as an uneven recovery, the labor market and possible structural changes derived from the crisis could influence inflationary pressures in the medium term.
The authorities seek to boost the recovery in one of the richest countries in Latin America and, at the same time, control inflation. They face numerous challenges, including rising commodity costs and an increase in local coronavirus cases. Going forward, analysts expect the economic outlook to improve with stimulus, covid-19 vaccination and stronger global demand.
Traders expect borrowing costs to rise in December, according to a central bank survey released last week. Annual inflation accelerated to 3.3% in April in food and energy costs, above the official target of 3%.
Chile reported 8,680 coronavirus infections on May 28, marking the second highest daily figure since the start of the pandemic.
In another statement, unemployment in the three months to April fell to 10.2%, surprising analysts who expected an increase, the National Institute of Statistics reported Monday. Retail sales, industrial production and manufacturing production increased compared to a year ago.
Original Note: Chile Central Bank Says Timing of Key Rate Hikes Is Uncertain
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