Chile: Central Bank cuts policy rate to support growth
July 15, 2014
At its 15 July meeting, the Central Bank decided to cut the policy rate by 25 basis points from 4.00% to 3.75%. The decision met market expectations. This is the first time since March that the Bank has decided to reduce 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 developed economies. Regarding commodity prices, there has been a noteworthy increase in copper prices, while agriculture prices have recorded a decline.
However, local economic news suggests that, “the pace of expansion of output and demand has slowed further.” The Bank went on to say that the economy is losing momentum amid falling investment compounded by a decline in private consumption. Regarding price developments, the Central Bank stated that headline inflation increased in June, which was associated with the depreciation of the peso. As a result, “the most likely scenario continues to consider that inflation will stay above the upper bound of the tolerance range still for some months,” and later reach the 3.0% target.
Author: Dirina Mançellari, Senior Economist