Banco Central de Chile revised the country's growth forecast for 2018 to between 3.25% to 4% from a previous estimate of 3.0% to 4.0%, Reuters reported, citing Central Bank President Mario Marcel.

Growth would be driven by an increase in investment and consumption, Marcel said in a meeting with Chile's senators. Domestic demand is seen growing 4.1% this year, up from a previous 4.0% forecast, while investment is predicted to rise 4.5%. Consumption would expand 3.6%, the central bank added.

Chile's gross domestic product grew by 4.2% year over year during the first quarter, its best level since the third quarter of 2013.

As a result, the central bank also changed its inflation forecast to 2.8% in 2018, up from 2.3% previously and closer to the central bank's target of 3.0% in 2019. The forecast supports maintaining monetary stimulus at or near current levels in the short term, the central bank said.

Marcel said "the probability of needing a more expansive interest rate has been reduced."

The central bank earlier decided to keep the policy interest rate unchanged at 2.5%, citing Chile's sustained economic recovery.