Central Bank of Chile

July 16, 2014

After slicing Chile’s monetary policy rate on July 15 by another 25 basis points to 3.75%, the central bank Board released a statement that observed a continuing slowdown of growth that’s already sub-trend.  Even though inflation of 4.3% exceeds target by more than a percentage point, it’s receding, and officials predict “that inflation will stay above the upper bound of the tolerance range still for some months, and then return to the target” of 3%.  This was the fifth cut of 25 bps in the past nine months, the others happening last October, November, February, and March.  There was also a 25-bp reduction in January 2012.  Although today’s move was anticipated by only a minority of analysts, the statement suggests that easing may not be finished:  “The Board will consider the possibility of making additional cuts to the monetary policy rate in line with the evolution of domestic and external macroeconomic conditions and its implications on the inflationary outlook.”

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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