Central Bank of Chile

February 12, 2016

Chilean monetary policy has been tightening lately as in neighboring Peru to its north, but officials have been acting less aggressively.  In contrast to Peru’s four 25-basis point moves since September including a hike announced yesterday, officials at the Central Bank of Chile have tightened just twice, also by 25 basis points each in October and December but not this month.  The latest Chilean monetary policy statement suggests that further “measured” tightenings will indeed be undertaken”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 presently lies above the 2-4% target range, and core is near to 5%.  But medium-term inflation is still anchored near the target mid-point, and growth in output and demand appears less dynamic in Chile than in Peru.  The statement pledges to monitor inflation indicators “with special attention.”  October’s initial rate increase was the first since June 2011 and followed a period of policy easing from January 2012 to October 2014 in which the key Chilean interest rate was cut to 3.0% from 5.25% in nine 25-bp adjustments.

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



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