Central Bank of Chile Leaves Overnight Interest Rate at 5.0%

February 15, 2013

The interest rate benchmark has been steady since a 25-basis point cut in January 2012, which was the one and only reduction so far.  No second reduction is in sight, since Chilean economic growth exceeds 5% and is surpassed in Latin America by only Peru.  Nor is a rate hike in the immediate offing, since tightening might put extra upward pressure on the peso and because CPI inflation of 1.6% is well under the nominal existing interest rate level and below the central bank’s 2-4% medium-term target.  A statement released by the central bank notes that “recent output and demand indicators exceeded forecasts in the last Monetary Policy Report. The labor market is still tight. Headline and core inflation are below 2% y-o-y, while inflationary expectations in the policy horizon remain aligned with the target. The peso has appreciated.” 

Prior to the single rate reduction made thirteen months ago, officials implemented a dozen rate increases from June 2010 through June 1011, raising such to 5.25% from a Great Recession trough of 0.50%.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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