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Published on 2/18/2011 in the Prospect News Emerging Markets Daily.

Chile hikes monetary policy rate 25 bps to 3½%, cites growth forecast

By Susanna Moon

Chicago, Feb. 18 - The Central Bank of Chile said its board decided to raise the monetary policy interest rate by 25 basis points to 3½% at its monthly monetary policy meeting.

"Internationally, the outlook for growth in developed economies has improved, and the dynamism of emerging economies has continued," the bank said in a press release.

"Concerns regarding financial risk in some European economies persist. Thus, difficulties in the recovery of developed countries are still an important risk factor for emerging economies."

The board noted the rising prices of commodities, especially for food, and the growing number of countries that have been reducing their monetary stimulus.

The trend for output, demand and employment in the country remain positive and in line with projections in the last monetary policy report, the bank said.

The peso has appreciated since the last meeting, the bank added.

The board said it will need to continue to reduce the monetary stimulus in coming months, in line with forecasts in the last report. The pace will depend on the unfolding macroeconomic conditions, the bank said.

Accordingly, the board said it will continue to use its policies with flexibility so that projected inflation stands at 3% over the policy horizon.


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