Monday , November 30 2020

B. Central would lower the projection to 3% -4% for GDP in 2019 and set a new yield curve

The economic scenario changed. The external panorama became more complex and influenced the outlook for growth for the world. While the upcoming US-China agreement would end the commercial war, it would not have had a major impact on Chile's growth outlook.

Internally, the discussion on the tax reform has become more complex than necessary, and the idea of ​​legislation has not yet been approved. All of these factors affect the agents' GDP expectations. In fact, the study of the central bank's economic outlook for the second consecutive time dropped the upward projection for GDP 2019 from 3.6% in January to 3.5% in February and 3.4% in March. While Consensus Forecasts predicts that activity will grow 3.3%.

This new economic reality will be what the central bank should reflect in the next March Monetary Policy Report (IPoM), which will be presented on April 1 before the Senate Finance Committee.

Among the major changes, economists expect to reduce growth projections from 3.25% to 4.25% to between 3% and 4%, centered at 3.5%. Martina Ogaz, the EuroAmerica economist said that "should be adjusted to a range of 3% to 4%, more than anything to adjust the midpoint of the numbers that have internalized the market now, and have also been honest with the new figures in January . "

In detail, domestic demand will grow between 3.1% and 3.8%, while investments will be the variable that will support growth. Experts expect to maintain the forecast of 6% projected in December, while consumption remains between 3.3% and 3.5%.

Inflation and monetary policy. The market also hopes that the key will strengthen the announcement by the chairman of the governing body, Mario Marcel, who said in early March that "we are not in a hurry to normalize monetary policy; we want to follow a path that is in Consistent with the medium-term convergence of inflation, strengthen monetary policy resistance and be willing to respond to any deterioration in external conditions. "

These statements were interpreted by the market as a sign of moderation and therefore there will no longer be four increases this year, but no more than an increase this year. This change is what should be reflected in the next IPoM.

Antonio Moncado, BCI economist, pointed out that "there will be a moderation in monetary normalization, taking into account lower inflationary pressures and the adjustment of the business view. It would adapt its work to the implicit expectations of financial instruments, ie a further increase in second half of this year. "

Martina Ogaz added that "more than anything, the central bank must adapt to what the Swap expectations have, which is a further increase in the second half of the year."

César Guzmán, an economist at Security, argued that "BC will moderate its restrictive tone, which is essentially three factors: the change in Fed's discourse, accompanied by other developed central banks, towards a more expansionary position, the inflationary pressures contained at local level with some more slender than expected in December. "

With regard to the inflation outlook, economists agree that it will reduce current price developments. Thus, the adjustment is expected to range from 2.9% to a range between 2.5% and 2.8%.

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