Central Bank of Chile

May 17, 2013

The central bank board left the monetary policy interest rate at 5.0%, its level since a sole 25-basis point cut in January 2012.  Previously, the rate was raised 475 basis points in a dozen moves between June 2010 and June 2011 after having been cut by 775 bps to 0.5% during the first seven months of 2009.

A statement from Chilean monetary officials observed softer growth, a much lower price of copper, sub-target inflation, a softer peso and expected medium-term inflation that remains anchored around the 3% target.  The current policy stance is considered neutral, neither boosting nor restrained the economy.

First-quarter indicators show decelerating output and demand. The labor market is still tight. Headline and core inflation measures remain close to 1% y-o-y, while surveys suggest that inflationary expectations over the policy horizon remain around the target. The exchange rate has depreciated; however, in real terms it is still in the lower part of the range that is compatible with its long-term fundamentals.

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



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