Chilean Monetary Policy Still on Hold

August 16, 2012

The Central Bank of Chile’s Policy Board kept its monetary policy rate at 5.0% as expected.  It has been at that level since a solitary 25-basis point cut in mid-January, which was a pre-emptive action taken in response to intensifying global risks caused by the European crisis.  A statement released today observed some lessening of Ezone and global financial tensions and somewhat stronger-than-forecast recent growth in Chilean demand and production.  The peso, which had previously depreciated, has shown a better bid tone lately, and both headline and core inflation are below the 3.0% medium-term target.  Consumer prices went up 2.8% between mid-2011 and mid-2012.  Officials nonetheless warned that a fresh upsurge of euro area tensions remains possible and said that future policy would be guided by the impact of developments on Chilean inflation prospects vis-a-vis the goal of 3.0%.

Prior to January’s 25-basis point rate cut, the key interest rate had stood at 5.25% for seven months, having been raised seven times from June 2010 to December 2010 by a total of 275 basis points and a further five times from February 2011 to June 2011 by 200 basis points.  The rate bottomed at 0.50% in the Great Recession.  Chile has Latin America’s fifth largest economy.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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