Very Accommodative Chilean Monetary Policy Stance

September 9, 2009

As expected, the Central Bank of Chile agreed to keep its TPM policy interest rate at 0.5% and to retain complementary unconventional quantitative measures — term liquidity facilities for banks that were established in July.  The last rate cut was also made at that July meeting following six cuts in 1H09.  All seven reductions amounted collectively to 775 basis points from 8.25% at the start of this year.  Chilean CPI inflation declined  even more sharply over the past nine months from an on-year rise of 8.9% last November to a drop of 1.0% in the twelve months to August.  A statement from monetary officials observes that demand and activity are now rising again but not above year-ago levels.  Expected inflation has remained stable.  While the policy rate is as low as it will go, the statement promises to keep the rate at 0.5% “for a prolonged period.”

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


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