Chile Cuts Key Interest Rate To 3.25%


The Central Bank of Chile lowered its benchmark interest rate by 25bps to 3.25 percent on January 19th, 2017, as widely expected, in an attempt to boost growth amid a slowdown in inflation. Annual inflation rate fell to 2.7 percent in December, the lowest in over three years. Policymakers also said that if the recent trends of the economic scenario and inflation persist, it will be necessary to boost the monetary impulse.

Statement by the Central Bank of Chile:

Internationally, global financial conditions have improved and emerging economies’ asset prices have risen. The prices of copper and oil, beyond ups and downs, have remained above those of mid-2016. Activity indicators confirm improvements in the developed world and a weakening in Latin America.

At home, the CPI posted an unexpectedly low monthly variation, resulting in a 2.7% increase for the year. Inflation expectations at the end of the projection horizon are near target, although for the coming months they remain in the lower part of the tolerance range. Again, activity showed weak figures, this time concentrating in sectors other than natural resources. All in all, demand-side indicators continue to grow at a similar pace of previous quarters. The labor market continues along previous trends.

Long-term interest rates returned to their pre-US-election levels. As was said in the last Monetary Policy Report, the Board estimates that, if the recent trends of the economic scenario persist, and so do their implications on the mediumterm inflation outlook, it will be necessary to boost the monetary impulse. At the same time, it reiterates its commitment to conduct monetary policy with flexibility, so that projected inflation stands at 3% over the policy horizon.

Chile Cuts Key Interest Rate To 3.25%


Central Bank of Chile | Joana Ferreira | joana.ferreira@tradingeconomics.com
1/19/2017 9:41:53 PM