50 Basis Point Rate Cut in Chile

June 17, 2009

As in Turkey, Chile’s central bank cut its monetary policy interest rate by 50 basis points on Tuesday.  Six consecutive monthly rate cuts have reduced the rate from 8.25%, which prevailed from last September 4th through the first week of January to the new rate of 0.75%.  That ranks Chile with the biggest rate reductions of 1H09.  The bulk of this decline came in drops of 250 basis points each in February and March.  The cut amounted to 50 basis points in each month of 2Q09.  A statement from the Bank of Chile said that domestic output in 2Q09 likely was lower than a year earlier, while unemployment is still rising and lending conditions are tight.  Core inflation has declined, and total inflation is seen at an acceptable 3% through the target horizon period.  Officials suggested that a rise in rates is likely to happen later than financial market prices are assuming.  The statement does not hint that the policy rate will drop even lower.

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.


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