Chilean Monetary Policy Left Unchanged

August 14, 2009

The Central Bank of Chile retained its monetary policy interest rate at 0.5%, breaking a string of seven consecutive cuts in 2009 adding up to 775 basis points.  The rate was reduced by 600 bps in the first quarter, 150 bps in the second quarter, and by a final 25 bps on July 9th.  Monetary officials also kept their pledge to offer six-month funds at the overnight rate.  Chilean CPI inflation dropped from 8.9% last November to 0.3% in July, and today’s press release predicts it will decline below zero.  GDP fell in the first quarter by somewhat more than 2.0% both from 1Q08 and quarterly at an annualized rate.  Chilean industrial production at mid-year was over 14% lower than a year earlier.  Officials are pledging to keep interest rates at their extremely low levels “for a prolonged period of time” in order to lift inflation back to the 3% target in the medium term.

Copyright Larry Greenberg 2009.


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