Central Bank of Chile Tightens Again

September 1, 2021

Yesterday’s monetary policy review ended with a greater-than-expected 75-basis point hike in the Central Bank of Chile’s policy interest rate to 1.50%. An initial 25-basis point increase had been authorized at the previous review in July. The latest decision was made unanimously, and officials signaled that interest rate normalization has further to go. At 1.50%, all but 25 basis points of the two rate reductions in March 2020 have now been reversed. CPI inflation of 4.5% is running above the 3% medium-term target, and officials expect the CPI to climb additionally and stay above 5.0% through the  middle of next year. Aside from energy  price pressure, inflation has been fanned by stronger-than-expected growth in domestic demand and a softer peso. There has been an upward revision of projected real GDP growth this year to low double-digit territory.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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