Central Bank of Chile holds rate at 0.5%, aims to keep inflation at 3%

By Susanna Moon

Chicago, Nov. 12 - Central Bank of Chile said its board decided to maintain the monetary policy interest rate at 0.5% annually at its monthly monetary policy meeting.

The members also decided to reduce the maximum term for the FLAP to 150 from 180 days beginning Dec. 14 and to continue reducing it by 30 days each month in order to end access to the facility in May of next year, according to a press release.

The bank said that recent data confirm prospects for global activity for this year and next, which have contributed to a progressive stabilization of financial markets.

Commodity prices have risen, the release noted.

The bank said, domestically, available information suggests that, despite the setback of September, output and demand increased in the third quarter, although at a slower pace than forecast.

Unemployment and employment have remained stable, and lending conditions have improved in the margin while still tight.

In October, consumer price index inflation and the various core measures showed no variation, according to the release.

Wage dynamics continued to be in line with historical patterns. Reduced year-on-year inflation rates are foreseen for the coming quarters. Medium-term inflation expectations have remained stable. The real exchange rate has fallen.

The board said it estimates that the macroeconomic environment and its monetary policy implications do not differ substantially from those of the last monetary policy report.

This is consistent with a monetary policy interest rate that will be held at its minimum level of 0.5% for a prolonged period of time that will last at least until the second quarter of next year.

The board said it estimates that the pace of monetary policy rate normalization during the second half of next year will be more gradual than the one implicit in financial asset prices. Therefore, it will continue to use its policies with flexibility so that projected annual inflation stands at 3% over the policy horizon, according to the release.

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