Chile

May 18, 2012

Officials at the Central Bank of Chile did not change the 5.0% monetary policy rate.  This was the fourth consecutive monthly meeting to conclude with a decision of no interest rate change.  From a Great Recession low of 0.50%, 275 basis points of increase were implemented in 2010 and a further 200 bps of increase were completed in the first half of 2011.  In January of this year, however, a sole cut of 25 basis points back to 5.00% marked the first rate decline in 2.5 years.

Officials face a mix of considerations to tighten or ease, and this month’s statement accentuates the latter a bit more than the April statement.  Officials express greater concern about trends in Europe and observe softer-than-expected trends in the United States and China.  Commodity prices are softer, expected inflation is satisfactory, and core inflation is hovering around 3%, the policy horizon target.  Policymakers promise a flexible policy but probably would require a significant change in data trends to enact a rate change.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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