Chile cuts rate by 25 bps to 4%; growth drops off; inflation falls

By Susanna Moon

Chicago, March 14 - The Central Bank of Chile said its board decided to lower the monetary policy interest rate by another 25 basis points to 4% at the monthly monetary policy meeting.

Annual inflation has fallen, reflecting higher prices of foodstuffs and fuels, and the depreciation of the peso, according to a bank news release. Year over year, headline inflation and the core measure that excludes foodstuffs and energy was 3.2% and 2.5%, respectively.

Inflation expectations are still about 3% in the relevant monetary policy horizon.

The Chilean economy has continued to lose steam, and domestic output and demand have grown less than expected, particularly in investment-related sectors.

In developed economies inflation "has remained subdued, so a slow normalization of their monetary policies is foreseen," the bank said.

Financial conditions internationally have remained stable, the bank noted.

Developed economies are seeing a gradual recovery while projections "have receded" for emerging markets, particularly Latin America, the bank noted.

Last month, the Central Bank of Chile announced that its board decided to cut the monetary policy interest rate to 4¼% from 4½%. As reported, the bank last lowered the rate by 25 bps in November to 4½%.

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