A Chilean Central Bank Interest Rate Cut

October 17, 2013

Board members at the Central Bank of Chile cut their policy interest rate for the first time since January 2012.  Both reductions were by 25 basis points, and the new rate level becomes 4.75%.  Previously, the rate was slashed by 775 basis points to 0.5% over the first seven months of 2009 and then raised by 475 bps between June 2010 and June 2013.  Today’s decision was not anticipated by analysts.

A statement from the central bank notes slower world growth, a lower Chilean export/import price ratio, less favorable financial conditions, the maturing cycle of mining sector investment, less inflation than previously anticipated, and and revised market expectations that see further delay as inflation normalizes toward 3%.  The statement also mentions recent dollar depreciation, caused in part by the decision to delay tapering by the Fed, and observes that the U.S. fiscal deal is only a temporary remedy.

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



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