Chile's central bank cut its 2017 growth forecast to between 1 and 1.75 percent from its previous view of 1 percent to 2 percent as the mining and construction sectors continue to lag, the bank said Monday. The bank also said it was "most probable" that, following rate cuts of 100 basis points this year, further movement in the benchmark interest rate will not be needed.
"Considering the rate cuts already realized, we believe our monetary policy has reached an already expansive level," central bank President Mario Marcel said in remarks quoted in its quarterly Monetary Policy Report (IPoM). "In the most probable scenario, new movements in the rate will not be necessary, and the most important thing will be to let the (already enacted) monetary impulse permeate the economy."
The economy of the South American country, the world's top copper exporter, has been hit by a slowdown in investment linked to a fall in the copper price and political uncertainty. The bank said in its report that consumer spending was stable, but lagging activity in construction and the key mining sector was continuing to weigh on the economy. In particular, the effects of a prolonged strike at BHP Billiton Ltd's Escondida copper mine, the world's largest, were still having an effect on second-quarter growth, even though the labour action ended in March.