Macro Watch: Chile GDP and key rate, Jamaica inflation

Chilean GDP growth accelerated in the second quarter, the central bank said on Friday.

GDP expanded 0.9% year-on-year compared with 0.1% in Q1, when a strike at the Escondida copper mine, the world's biggest, curtailed output of the key revenue-generating commodity.

Chile's copper output for the first half of the year was down 9.0% y-o-y to 2.52Mt.

The economy's internal demand increased 3.9%, with household consumption growing 2.6% and government consumption 2.7%. However, investment and exports contracted, by 4.1% and 3.5%, respectively.

"While today's data are largely positive, the renewed weakness in investment reinforces our view that the recovery is likely to be weaker than most expect and we remain comfortable with our below-consensus forecast that the economy will grow by just 1.2% over this year as a whole," London-based research firm Capital Economics said in a report.

Chile's government expects the country's economy to expand 1.5% this year. The figure is down from a previous forecast of 2.25% made in 2016. Last year the Chilean economy - hit by lower commodity prices - expanded 1.6%, its slowest pace since 2009.

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Chile's central bankers held the key rate steady at 2.5% for the third month in a row.

In a statement, the bank cited favorable external conditions and growth in commodity prices.

The research unit of the local subsidiary of Spanish banking giant Santander said the central bank, in the short term, faces two possible scenarios. In the first scenario, the economy gathers strength as external conditions improve and confidence grows, permitting the bank to close breaches without implementing additional economic stimulus measures to hit its inflation target. In this scenario, it said, the central bank will keep the rate steady at 2.5% for the next few months and begin executing a monetary normalization process around the middle of next year.

In the second, activity fails to accelerate at the expected pace and the global depreciation of the dollar continues, which would generate greater disinflationary pressures. In this scenario, it said, the bank would have to introduce additional stimulus measures, taking the key rate down to 2.0%.

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Inflation in Jamaica in the 12 months through June was 4.4%, the Bank of Jamaica said.

Monthly inflation was 0.7%, compared with 0.9% in June last year, and average inflation of 0.4% for June over the past five years.

Twelve-month inflation in June last year was running at 2.5%.

A key driver behind June inflation this year was food and non-alcoholic beverages, the bank said, citing the impact of flooding in May.

Inflation for fiscal year (April-March) 2017/18 is expected to fall within the target range of 4.0-6.0%.

Bank of Jamaica governor Brian Wynter said lending rates had fallen over the past year and were expected to continue to fall, Jamaica's state news service reported.

At the end of May the country's business loan and personal loan portfolios were 13.6% and 12.2% bigger, he said.