Chile experienced rapid growth during the second quarter that could give room for its exchange traded fund (ETF) to flourish and giving the Central Bank room to raise interest rates in an effort to stave off inflation.
Chile’s GDP grew 4.3% during the second quarter, higher than the anticipated 3.3%. This growth was fueled by an 11% increase in demand, and this is giving policy makers room to raise interest rates if need be.
Private consumption in Chile rose 5.9% during the second quarter, as Chileans spent 15% more on durable goods. Fixed capital also went up 23% from one year earlier due to investment in machinery and equipment.
Sebastian Lloyd for Bloomberg reports that the central bank raised the interest rate by 1.25% so far this year, to a nine-year high of 7.75%.
A quarter-point increase is expected around September when the central bank meets again.
Chile benefits from a rich supply of natural resources, including copper. The country produces one-third of the world’s supply. It also trades fish, wine, pulp and paper products, fruit and chemicals.
iShares MSCI Chile Index (ECH) is down 9.2% year-to-date.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.