Chile: Central Bank cuts policy rate to support growth
October 16, 2014
At its 16 October meeting, the Central Bank cut the policy rate by 25 basis points from 3.25% to 3.00%. The decision met market expectations. This is the fourth consecutive meeting since March at which the Bank has decided to cut its benchmark interest rate in order to support economic growth.
On the international front, the Bank stated that global growth and inflation will most probably be lower than expected in the incoming quarters. Regarding commodity prices, there has been a drop in prices for the majority of commodities, in particular fuel prices, which have recorded a significant drop.
Local economic news suggests that the economy is underperforming mainly due to weak output and feeble domestic demand. Regarding price developments, the Bank went on to say that annual inflation was higher than expected in September. According to the Bank, “[t]he most likely scenario assumes that inflation will stay above the upper bound of the tolerance range still for some months, to later return to the target.”
Author: Dirina Mançellari, Senior Economist