50 Basis Point Central Bank Rate Cut in Chile

June 11, 2019

The Central Bank of Chile last Friday unexpectedly cut its benchmark interest rate by 50 basis points to 2.50%, the lowest level sinceĀ  a 25-basis point hike in January. The policy reversal returns the key interest rate to the low prevailing from May 2017 until October 2018. According to a officials, one should not infer this tightening is the first of several moves:

The Board estimates that, in light of the updating of the structural parameters, the
economy has not recovered enough to close the activity gap and boost inflation.
Accordingly, the Board has deemed necessary to recalibrate the monetary impulse.
The Board estimates that, if the baseline scenario materializes, this change in the MPR
will suffice to ensure the convergence of inflation to the target in the policy horizon.
Going forward, the onset of the MPR normalization process will depend on inflation

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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