(Bloomberg) -- Chile’s economic activity rose more than expected for the fourth straight month in January, corroborating the central bank’s stance that there’s a high bar for further interest rate cuts.
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The Imacec index, a proxy for gross domestic product, increased 0.4% from December, above the 0.2% median estimate of analysts in a Bloomberg survey. It is also the fourth consecutive month of growth, the longest streak of such gains since 2021. Activity rose 2.5% from a year prior, the central bank reported on Monday.
Chile’s economy is beginning to turn the corner after faltering in the middle of 2024 as it goes into a year that culminates with presidential elections. Growth is getting support from lower interest rates and real wage gains, both of which are propping up consumer confidence. While activity in top trading partner China is firming, global trade tensions are still looming over the mining sector.
What Bloomberg Economics Says
“Chilean activity rose and domestic demand was strong early in 2025, buoyed by higher real wages. The January data signal the negative output gap is narrowing more quickly than policymakers anticipated. They also back the central bank’s less dovish tone at its last policy meeting. We expect policymakers to keep interest rates on hold into the second quarter.”
— Felipe Hernandez, Latin America economist
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Commerce jumped 3.4% on the month in January on gains in both retail and wholesale, while services rose 1% during the period, according to the central bank. On the other hand, mining plunged 6.1% during the period.
Last week, US President Donald Trump signed an executive action directing the Commerce Department to examine possible tariffs on copper. The red metal is Chile’s top export product, and the US is the nation’s second-biggest trading partner.
Locally, policymakers led by Rosanna Costa held borrowing costs unchanged at 5% in January, down from a post-pandemic peak of 11.25% in mid-2023. In the minutes to that meeting, central bankers expressed concern about rising inflation expectations, with one board member going as far as floating future rate hikes to tame consumer prices.
Annual inflation will run near 5% in the first half of this year before slowing to the 3% target, according to central bank estimates published in December.