Chile keeps 2½% policy rate as near-term inflation expectations drop

By Wendy Van Sickle

Columbus, Ohio, July 14 – The Central Bank of Chile’s board decided to maintain its monetary policy rate at 2½% at its monthly meeting in July.

Since the board’s last meeting, long-term interest rates increased globally, but financial conditions remain favorable, the bank said in a statement.

“In general, news was consistent with the scenario of gradual recovery in global activity,” the bank stated.

Domestically, June’s monthly inflation was at 0.4%, which the bank said was “heavily influenced by the behavior of prices of fresh fruits and vegetables and some other products,” which brought year-over-year inflation to 1.7%.

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

Partial second-quarter activity and demand figures are consistent with forecasts and reflect the negative impact of mining and construction, and private consumption growth remains stable, in line with labor-market performance, the bank said.

The bank said it remains committed “to conduct monetary policy with flexibility, so that projected inflation stands at 3% over the policy horizon.”

The bank reduced the policy rate by 25 basis points to the current 2½% at its meeting in May, after having also trimmed the rate by 25 bps in each of April and March.

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