Central Bank of Chile Kept Interest Rate at 3.0%

March 20, 2015

Eight 25-basis point reductions of Chile’s policy interest rate were made between January 2012 and September 2014, including the last six since October 2013, but policy has not changed subsequently.  The problem is above-target inflation.  In a statement very similar to the previous one issued five weeks ago, Chilean central bank officials had this to say about inflation:

As in the previous month, February’s inflation exceeded the market’s expectation. Core inflation remains high. In the most likely scenario, annual inflation is forecast to remain above the tolerance range for some months, a development that will continue to be monitored with special attention. Medium-term inflation expectations have remained around 3%.

Economic growth picked up strongly last quarter, a sign that falling prices for copper, Chile’s main export commodity, has not hit Chile as enduringly as feared.  Officials have to guard against excessive peso depreciation, which could result in a higher path for inflation.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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