Chile Hit by Raft of Weaker | Jinhua SUPSK Co.,Ltd

(Bloomberg) -- Chile’s retail and industrial sectors both posted bigger-than-expected declines in July in a slate of economic data published days before the central bank is expected to deliver another big interest rate cut.

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Retail activity plunged 10.1% from a year prior, more than the -9.8% median forecast of analysts in a Bloomberg survey, and dropped 0.4% from June. In 12 months, manufacturing and industrial production declined 3.9% and 1.7%, respectively, also worse than expected, the national statistics institute reported on Thursday.

Chilean central bankers led by Rosanna Costa have thrown their weight behind plans for a swift monetary easing cycle as economic activity stagnates and inflation eases toward target. Policymakers cut rates by 100 basis points to 10.25% in July, while indicating that future reductions may be smaller. Bank Vice President Pablo Garcia said their outlook is largely unaffected by a recent drop in the peso and floods in a key agricultural region.

Read more: Chile Central Bank VP Says Outlook Is Unaltered by Currency Drop

Policymakers will cut rates 75 basis points to 9.50% on Sept. 5 and to 5% in a year, according to a central bank survey of traders published earlier on Thursday. Annual inflation forecasts ticked up to 3.65% in 12 months.

The peso has dropped nearly 6.3% against the dollar since the start of July on factors including Chile’s monetary easing cycle and doubts over the US and Chinese economies. A weaker currency fans inflationary pressure by making imports more expensive.

Chile’s economy shrank less than forecast in the second quarter as growth in the mining industry softened the blow from a prolonged retail slump. Going forward, gross domestic product is expected to shrink by 0.3% this year, according to a Bloomberg survey of analysts.

The central bank will publish its updated inflation and growth forecasts, together with the likely trajectory of borrowing costs, in its quarterly monetary policy report on Sept. 6.

--With assistance from Giovanna Serafim.