Chile Monetary Policy


Central Bank raises interest rates at slower pace

At the latest policy meeting on 14 October, the Central Bank of Chile lifted the policy rate by 25 basis points from 2.50% to 2.75%, in a decision expected by the market. The decision follows on four consecutive 50 basis points increases since June. According to the Bank, the recent appreciation of the peso is reducing price pressures from abroad, prompting inflation to remain somewhat below expected levels. Monetary authorities added that economic activity continues to expand at a robust pace, in line with the Bank's monetary policy scenario. The Central Bank stated that it will continue to reduce the current monetary stimulus while macroeconomic conditions evolve in the coming months, as internal and external indicators are signaling a tangible economic recovery, thus allowing for further monetary tightening. Against this backdrop, Consensus Forecast panellists expect monetary authorities to push, on average, the interest rate to 3.30% by end of 2010. In 2011, the benchmark interest rate is expected to end the year at an average of 5.65%.


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