Chile Central Bank: Recovery in Motion, but Challenges Persist in Certain Sectors
Chile’s central bank released a report on Tuesday indicating that while the economy is generally rebounding, certain sectors are still struggling, and financial market depth has not fully recovered to pre-pandemic levels. The bank highlighted concerns regarding commerce, construction, and real estate sectors, noting the heightened risk of defaults in these areas.
According to the bank’s assessment, external factors remain a significant source of risk for local financial stability. However, the bank noted that the financial health of local companies and individuals has shown improvement overall, as outlined in the semi-annual stability report.
Although mortgage payment delinquencies in the consumer sector have increased, the report emphasized that this remains relatively low. Household finances are stabilizing due to rising incomes and reduced financial burdens, providing positive momentum.
The report underscored the importance of strengthening the resilience of local agents and the domestic financial market in the face of external macroeconomic risks. It also highlighted potential risks arising from uncertainty surrounding U.S. monetary policy and the global increase in debt levels.
Chile’s inflation rate, which peaked at 30-year highs in 2022, has gradually approached the central bank’s target of 3%. This trend has led the bank to reduce its benchmark interest rate from a high of 11.25% to the current level of 6.5%.
The release of this report follows the central bank board’s decision to maintain capital requirements for risk assets at the same level as last May. This measure aims to bolster the economy’s resilience against severe stress scenarios, reflecting ongoing efforts to support economic stability and recovery.
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