Chile: Central Bank cuts policy rate to support growth
August 14, 2014
At its 14 August meeting, the Central Bank decided to cut the policy rate by 25 basis points from 3.75% to 3.50%. The decision met market expectations. This is the second consecutive meeting since March in 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 recent economic data confirm a positive outlook for the United States, while growth in Europe has lost pace. Regarding commodity prices, there has been a drop in prices of both copper and fuels.
However, local economic news suggests that the economy is losing momentum faster than expected mainly due to a noteworthy drop in investment and private consumption. Regarding price developments, the Bank went on to say that despite the rise in the inflation rate in July, inflation expectations remain around 3.0% in the medium term. According to the Bank, “[t]he most likely scenario continues to assume 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