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Chile Monetary Policy October 2019

Chile: Central Bank delivers third rate cut of the year in October

At its 22–23 October monetary policy meeting, the board of the Central Bank of Chile (BCCh) unanimously decided to cut the key benchmark rate to 1.75% from 2.00%, where it had sat since September. The move, which was in line with analysts’ expectations, marked the third rate cut this year and brought the key rate down to its lowest level since July 2010.

Receding inflation, moderate economic activity and more accommodative stances taken by global central banks were all behind October’s cut. Third-quarter data hints at an investment-driven pick-up in economic activity, following lackluster growth in the first half of the year as the world’s top copper producer felt the pinch of cooling global demand and lower prices for the red metal. That said, feeble consumer demand pointed to a longer-than-expected convergence of inflation to the 3.0% target, prompting the Bank to deliver a 50-basis-point rate cut.

Looking ahead, policymakers noted that further monetary stimulus may be needed for inflation to converge at the target level, especially amid downside risks to growth stemming from the partial standstill of the country following the wave of protests which have rocked the country’s major cities since 18 October. Over the medium-term, the pace of economic expansion should be determined by the magnitude and velocity of the reconstruction process, coupled with the impact of the announced government measures.

The next monetary policy meeting is scheduled for 6 December.

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