Recent Macroeconomic Developments and Prospects in Chile: January 20061
Director of Financial Operations
Central Bank of Chile
I thank HSBC for hosting this call, as well all of you that dialed in for giving me an
opportunity to make some remarks on Chile’s recent economic developments and
prospects. I will base my presentation on the latest Monetary Policy Report issued by
the Central Bank, released yesterday to the public, and which you can download from
our web site, www.bcentral.cl.
The highlights of this report are the following:
• We estimate that growth during 2005 reached 6.3%, in line with the forecast we made
in September, and maintain our forecast that the growth of GDP in 2006 will be
between 5¼ and 6¼%. We expect the composition of growth on the demand side
will be more balanced, with domestic demand growing at a more sustainable rate of
6.6% in 2006, slowing down from an estimated 11.1% growth in 2005.
• We forecast that annual CPI inflation will be around 4% in the short run, will then fall
below the center of our target range of 3% during some quarters, to finally converge
to such target.
• Our forecasts make the assumption that the monetary policy rate will continue to
increase at pace comparable to the one implicit in the recent market interest rate
structure, which is slower than the one observed during the second half of 2005. Also,
our forecasts assume that the peso will depreciate somewhat in real terms in our
projection horizon, relative to the values observed during the two weeks prior to
Let me now get into some of the details.
Prospects for the external environment relevant to the Chilean economy have improved
in recent months. Global growth has strengthened, as have terms of trade thanks to
record-high copper prices. The oil price has been on average slightly above US$60 per
barrel, down from the high levels triggered by the hurricanes in the Gulf of Mexico last
August. Inflation hikes in the main developed e