Chile holds policy rate at 3½% with uncertainty after U.S. elections

By Marisa Wong

Morgantown, W.Va., Nov. 17 – The board of the Central Bank of Chile decided to maintain the monetary policy rate at 3½% at its monthly meeting in November.

The bank focused on the increasing volatility of financial markets after the U.S. elections in its press release on Thursday. The bank said it is worth noting the appreciation of the dollar and especially the rise in long-term rates.

Financial conditions for emerging economies worsened but remain better than they were early in the year, the board pointed out.

Commodity prices have posted mixed movements. Prices of metals, especially copper, increased, while those for oil and derivatives fell.

Activity indicators and prospects do not show significant change, but the potential effects of recent events are still unclear, the bank said.

In October, the monthly CPI variation was again unexpectedly low, driving annual inflation to 2.8%, the bank reported.

For the short term, inflation expectations have dropped but are near the target at the end of the projection horizon.

The third quarter had domestic output and demand behaving as forecasted in the September monetary policy report, which means the labor market continues to adjust gradually.

Long-term interest rates have increased, the bank added.

The board again stated its commitment to be flexible with monetary policy to keep projected inflation at 3% over the policy horizon.

The bank last raised the rate by 25 basis points to 3½% on Dec. 17, 2015.

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