At the local level, short-term interest rates continue the downward trend, while long-term rates remain high, the institution pointed out.

Since the last report, local risk indicators have remained without significant changes, financial stress was reduced and the price volatility index did not show relevant changes, the Central Bank indicated.

The operating margin, indebtedness and financial burden of large companies improved; however, problems persist in smaller firms, especially in the construction and trade sectors.

The Central Bank specified that the residential real estate sector continued to lag behind the rest of the economy, as sales are at low levels and the inventory of unoccupied finished homes remains high.

Meanwhile, the situation of households is improving, although it still remains below pre-pandemic levels.

In this scenario, the main concern comes from the external sector, where there is much uncertainty due to the increase in geopolitical tensions worldwide.

An intensification of conflicts might affect the banking and non-banking sectors, noted the Bank of Chile, especially in the face of a possible increase in public spending on defense.

On the other hand, the negative impact of a possible implementation of protectionist policies cannot be ruled out, as it would generate an increase in trade restrictions or damage to the supply chains.

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