SANTIAGO (Reuters) - Chile’s central bank is expected to cut its official 2014 growth projection and upwardly revise the inflation forecast on Monday following months of persistent economic weakness and with inflation hovering above a five-year high.
The bank is seen lowering expectations for gross domestic product growth to a range of 2.5 percent to 3.5 percent from a prior view of 3.0 percent to 4.0 percent when it releases its quarterly Monetary Policy Report (IPoM), according to the median view of nine economists and analysts surveyed by Reuters.
The economy expanded 2.6 percent in the first quarter, the slowest quarterly growth since a devastating earthquake slammed the Andean nation at the beginning of 2010.
Central bank president Rodrigo Vergara said earlier this month that a downward revision of economic growth forecasts would not come as a surprise.
Cooling domestic demand - particularly investment, but also increasingly consumption - have weighed on the economy of the world’s top copper producer.
The bank is seen lowering its forecast for domestic demand to 2.5 percent from 3.3 percent and increasing its year-end inflation projection to 3.5 percent from a current 3.0 percent, the Reuters poll showed.
The bank has said that the most likely scenario is that the rise in inflation, which reached an annual level of 4.7 percent in May, above the bank’s 2 percent to 4 percent target, will be temporary.
On rates, the prevailing economic scenario should prompt the bank to continue with its expansionary bias, said seven of those polled. The other two expect the bank, which held its benchmark interest rate at 4.0 percent for a third consecutive month on Thursday, to keep it at that level through the end of the year.
The median estimate is for a 25-basis-point cut in the second half of the year.
After holding the rate steady on Thursday, the bank repeated in its post-meeting statement that it will consider future rate cuts depending on the evolution of domestic and external macroeconomic conditions and implications on the inflation outlook.
Reporting by Anthony Esposito; Editing by Jonathan Oatis