Chile trims policy rate 25 bps to 3¼%; inflation at low end of range

By Wendy Van Sickle

Columbus, Ohio, Jan. 20 – The board of the Central Bank of Chile decided to cut the monetary policy rate by 25 basis points to 3¼% at its monthly meeting in January.

The bank said in a statement that global financial conditions have improved and emerging economies’ asset prices have risen while the recent prices of copper and oil have remained above those of mid-2016.

Activity indicators show improvements in the developed world and a weakening in Latin America.

Domestically, the CPI posted an unexpectedly low monthly variation, resulting in a 2.7% increase for the year, the bank said.

Over the projection horizon, inflation expectations remain near target, but in the immediate months they are at the low end of the tolerable range.

Activity figures were weak again, this time in sectors other than natural resources; overall, demand-side indicators are continuing to grow at a pace similar to previous quarters, and the labor market is also in line with previous trends.

Meanwhile, long-term interest rates returned to their pre-U.S. election levels.

The bank predicted that, if the recent trends of the economic scenario persist, it will be necessary to boost the monetary impulse, but reiterated its commitment to conduct monetary policy with flexibility, so that projected inflation stands at 3% over the policy horizon.

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

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