Central Bank of Chile Retains 3.5% Interest Rate Level

January 15, 2016

Chile’s central bank interest rate had been raised in both October and December of 2015, lifting such from 3.0% to 3.5%.  A pause this month was not a surprise, nor is the likelihood of more increases during the first half of 2016.  A statement from the Central Bank Board explains the determinant of policy ahead:

The future path of the monetary policy rate considers measured adjustments aimed to ensure the convergence of inflation to the target, at a pace that will depend on incoming information and its implications on inflation. The Board reiterates its commitment to conduct monetary policy with flexibility, so that projected inflation stands at 3% over the policy horizon.

Inflation in Chile, as in Peru where rates were lifted today, stands currently at 4.4%.  The inflation target is 2-4%.  Core inflation is near 5%, but at least expected inflation remains anchored at the target midpoint.  Officials want to keep it so tethered.  Unfortunately, Chilean growth has been sputtering.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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