Chilean Policy Rate Left at 2.5%

March 20, 2018

The Central Bank of Chile’s Board voted unanimously to keep its 2.5% monetary policy interest rate. It reached that level in May 2017 after the last of four 25-basis point cuts that year. A statement released after the policy review observed two somewhat offsetting developments. On the one hand, the economy grew a little faster than expected in the second half of 2017 and continues at a decent pace that ordinarily would be expected to lift CPI inflation, which is hovering around 2% overall and at 1.5% among core items, to the 3.0% target midpoint during the policy horizon. On the other, the peso has appreciated and that contains import price pressures.

The evolution of the exchange rate in the coming months will cause inflation to be lower than expected in December, a situation that the Board will continue to monitor with special care, considering that it might jeopardize the convergence of inflation to the target over the policy horizon. Likewise, the Board reiterates its commitment to conduct monetary policy with flexibility, so that projected inflation stands at 3% over the two-year horizon.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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