Central Bank of Chile Cuts Interest Rate

January 19, 2017

A 25-basis point reduction to 3.25% was the first change in Chile’s monetary policy rate since a 25-basis point hike way back in December 2015. The move follows an unexpected deceleration of CPI inflation to 2.7% last month from 2.9% in November. Chilean growth has been soft, and that’s no longer confined to the resource sector according to a released statement. The inflation target is 3% in the medium term, and there appears to be a policy bias among central bank board members to ease. “The Board estimates that, if the recent trends of the economic scenario persist, and so do their implications on the medium term inflation outlook, it will be necessary to boost the monetary impulse.” There were two 25-basis point rate hikes late in 2015. The rate had previously been reduced to 3.0% in October 2014 from a peak of 5.25% between June 2011 and January 2012, and before even that downward run, the policy rate was increased aggressively between June 2010 and June 2011 from 0.50% to 5.25%. Chilean monetary officials are not shy about doing wide swings in their key interest rate in pursuit of the inflation target.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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