Central Bank of Chile Cuts Interest Rate to 3.0%

March 17, 2017

The Chilean monetary policy rate had been 3.5% for 13 months until a 25-basis point reduction in January, and now a second such cut has been engineered and statement released suggesting more easing may lie ahead: “if the recent trends of the economic scenario persist, and so do their implications on the medium-term inflation outlook, it could be necessary to increase the monetary impulse.” The two rate cuts this calendar quarter reverse a pair of similar-sized hikes in the final quarter of 2015. Officials worry about the weak trend in domestic demand, salaried employment and production. They note that while medium-term inflation expectations are aligned with the 3.0% inflation target, shorter-term price expectations have slipped under their tolerance range. Being confident that inflation should hover near their goal in the policy horizon, monetary policy is being utilized now to promote a little better growth. Persistent global risks cast some doubt over whether somewhat improved international economic trends can be sustained.

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



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