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Chile holds policy rate at 3½% with inflation expectations near target
By Marisa Wong
Morgantown, W.Va., Dec. 13 – The board of the Central Bank of Chile decided to maintain the monetary policy rate at 3½% at its monthly meeting in December.
The bank first focused on the rise of long-term interest rates in its press release on Tuesday.
The bank said it is worth noting the increase in the oil price and the persistence of the copper price above its mid-year levels.
The outlook has not changed significantly, partly because it is unclear what effects potential changes in the economic policies of developed countries will bring, the board said.
In November, the monthly CPI variation was in line with forecasts, posting an annual variation of 2.9%, the bank reported.
Inflation expectations at the end of the projection horizon are near target, but for the coming months they will remain in the lower part of the tolerance range, according to the release.
Provisional data for the fourth quarter show a weak performance, particularly in mining and some manufacturing lines. At the same time, demand data point to growth rates similar to recent quarters. The labor market continues to adjust at a gradual pace, the bank said.
Long-term interest rates have reversed some of their previous increases, and the peso has appreciated, the bank added.
The board estimates that if recent trends of the economic scenario persist, so will their implications on the medium-term inflation outlook, and as a result it will be necessary to boost the monetary impulse.
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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