(Updates with quotes from report, context, details on mining’s impact on growth)
By Dave Sherwood
SANTIAGO, April 1 (Reuters) - Chile’s central bank cut its 2019 economic growth forecast to 3 percent to 4 percent from a previous estimate of 3.25 percent to 4.25 percent in its quarterly IPoM report on Monday, saying sluggish inflation called for a slower, more cautious easing of monetary stimulus.
Inflation has been more subdued in Chile than initially expected in recent months. In the IPoM report, the bank revised down its 2019 year-end inflation forecast to 2.6 percent from 2.9 percent in December.
Despite dragging consumer prices in the first quarter, the bank highlighted continuing strong investment and said macroeconomic conditions still pointed toward “a necessary reduction in monetary stimulus on the policy horizon.”
“The process will proceed gradually and cautiously, considering that the reduced level of inflation has given us space to evaluate our approach,” the bank said in the report.
The more subdued outlook comes amid slower-than-anticipated growth in the first quarter, the bank said, citing in part “the weak performance of the mining sector” in Chile, the world’s top exporter of copper.
“The mining industry’s performance has revealed a certain level of instability, related to factors such as adverse climactic events and maintenance work that has caused several large mines ... to shut down temporarily,” the bank said.
Those factors, together with the long-running issue of declining ore grades at Chile’s largest mines “had repercussions on growth in the first quarter,” the bank added. (Reporting by Dave Sherwood Editing by Chizu Nomiyama and Jeffrey Benkoe)