SANTIAGO Chile's central bank on Wednesday lowered the top end of its estimate for the country's economic performance in 2023, saying it now forecasts gross domestic product (GDP) to show no growth in the most optimistic scenario.

The monetary authority previously expected an economic expansion of as much as 0.25% this year. It maintained the lower end of its GDP forecast at a 0.5% contraction.

The South American country's economy should rebound by next year however, the central bank said, with GDP growth expected between 1.25% and 2.25%.

Chile's central bank has fought to contain inflation, and on Tuesday cut its benchmark interest rate by 75 basis points to 9.5% as price pressures have eased more quickly than expected.

The central bank expects cuts to continue, it said on Wednesday, closing the year with a benchmark interest rate between 7.75% and 8%.

Annual inflation in Chile slowed to 6.5% in July, and is expected to fall to 4.3% by the end of the year, the bank said.

It is forecast to come down to the target of 3% in the second half of 2024, the central bank said, taking into account the slowdown in recent months, the peso's depreciation and high fuel prices internationally.

However, "the external scenario continues to be marked by high uncertainty," the monetary authority warned.

(Reporting by Fabian Andres Cambero; Writing by Gabriel Araujo; Editing by Kylie Madry and Emelia Sithole-Matarise)