Chile: Central Bank accelerates the pace of monetary tightening
March 17, 2011
At the latest monetary policy meeting on 17 March, the Central Bank raised the policy rate by 50 basis points to 4.00%, which represents a two-year high. The decision came as a surprise to market analysts, as the Central Bank had been raising rates by 25 basis points since October last year. According to the Bank, political unrest in the Middle East and North Africa, together with the devastating effects of the earthquake and tsunami that hit Japan, heightened volatility in financial and commodity markets. The Bank also stated that economic activity and inflation remain in line with expectations. However, escalating oil prices have pushed up private short-run inflation expectations. The Central Bank reiterated that it will continue to reduce the existing monetary stimulus over the coming months, as domestic and external sectors take positive strides.