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Central
Bank maintains interest rates unchanged
Despite increasing inflationary pressures, the Central Bank decided to
maintain interest rates unchanged at 2.75% at its regular monthly policy
meeting on 8 May. The Bank stated that even though core inflation had been
rising in recent months it remains within the ranges anticipated by
monetary authorities. Furthermore, headline inflation could fall further
in the short term due to lower oil prices and the stronger peso. Apart
from these short-term fluctuations, the Bank sees inflationary
developments in line with its centre of its target range.
Peso
continues to strengthen in April in line with regional trend
The peso continued its strengthening trend initiated since mid-March
throughout the month of April. Since 11 March, when the peso had reached
an all-time high at 758 pesos versus the US$, the currency had
strengthened substantially to 727 pesos per US$ by the end of March, a
nominal appreciation of 4.2%. In April, the currency appreciated an
additional 2.9% closing at 705 pesos to the US$. The main reason behind
the strengthening observed in the past two months seems to be increasing
optimism resulting from the resilient economy. In addition, the Chilean
peso has been bolstered by a regional trend of strengthening currencies,
not least aided by an increased risk appetite from international
investors, which is providing the Latin America region with ample capital
flows. The recent strengthening also confirms Consensus perceptions that
the weakening trend observed in the first three months of the year would
be reversed by the end of this year.
Trade
balance reaches highest surplus in eight years
In March, the trade balance reached US$ 483 million surplus. This was the
highest trade surplus recorded in eight years and is only second to a US$
503 million surplus recorded in March 1995. The huge March surplus was due
to a strong increase in exports (+ 13.6% over March 2002) and a much more
moderate import growth (+4.9% over the same period). Exports profited from
a strong increase in industrial product sales (+32.9% over March 2002),
whereas copper exports, which account for almost 40% of total exports,
remained virtually unchanged over the same month last year (+1.2%),
reflecting a lacklustre price setting. On the imports side, capital goods
purchases experienced robust 17.1% growth over March 2002 compared to much
more moderate increases in consumer and intermediate goods. The annual
trade balance surplus reached US$ 2.5 billion in March, a number which
Consensus Forecast panellists believe will rise by the end of the year. |
