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Banco Central Chile: Sep-23

• The Central Bank of Chile's decision to cut the monetary policy rate by 75bp instead of the anticipated 100bp reflects the amalgamation of global economic uncertainties and domestic financial conditions.
• While global inflation and growth dynamics, coupled with market uncertainties, shape the external environment, domestic indicators like the depreciating peso, rising unemployment, and high inflation rates provide the local context.
• Projections indicate an alignment towards achieving a 3% inflation rate by mid-2024, but future MPR adjustments hinge on the evolving macroeconomic landscape and potential economic shocks.

Chile economic activity growth 1.78% y-o-y in Jul-23

- Chile's economic activity grew by 1.78% year-on-year in July 2023, marking the highest growth since June 2022 and indicating a recovery beyond the 0.9% consensus expectation.
- Despite the positive performance, the growth rate remains 1.82 percentage points below the long-run average, highlighting the need for further progress.

Chile unemployment rate 8.77% (consensus 8.6%) in Jul-23

- Chile's unemployment rate rose to 8.77% in July 2023, further than the 8.6% consensus, reaching its highest level since March 2023.
- The current rate exceeds both the one-year average by 0.48 percentage points and the long-run average by 1.28 percentage points, indicating underlying structural issues in the labor market.

Chile CPI inflation 0.35% m-o-m (consensus 0.3) in Jul-23

- Chile's CPI inflation in July 2023 slightly exceeded expectations, growing by 0.35% month-on-month, indicating a potential revitalization of the economy.
- Despite the positive growth, the inflation rate remains below both short-term and long-term average levels, suggesting a relatively stable pricing environment.