Central Bank of Chile Flags Coming Interest Rate Hike
September 15, 2015
The Central Bank of Chile left its benchmark interest rate, which has been at 3.0% since a cut in October 2014, unchanged but released a statement forewarning markets that policy will be tightened as soon as the next meeting:
The Board considers that the convergence of inflation to 3% over the policy horizon will call for a reduction in the high monetary stimulus currently in place. Considering incoming data, it is foreseen that this process will begin shortly.
Consumer prices rose 5.0% in the year to August, a sharp acceleration from prior months, and measures of price expectations highlight a rise in expected inflation. The inflation target is 2-4%. Until now, officials have hoped to avoid tightening policy because economic output and demand are so weak. The statement notes that measures of confidence continue to deteriorate.
This month’s statement represents a reordering of the greatest problem from too little growth to too much inflation. The October 2014 easing was the last of nine 25-basis point interest rate cuts, engineered in January 2012, October and November of 2013, and February, March, July, August, September and October of 2014.
Copyright 2015, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Central Bank of Chile
ShareThis
