Chile Monetary Policy


Chile: Central Bank hikes rate in October

October 15, 2015

The Central Bank of Chile (BCCH) increased the policy rate from 3.00% to 3.25% at its meeting on 15 October in order to rein in high inflation. The decision contrasted the expectations of market analysts, who saw the rate remaining at 3.00%, where it had rested since October of last year. At the same time, the Bank signaled that further rate hikes were likely in order to bring inflation back to the 3.0% target, even though the Chilean economy has lost momentum in recent months.

As for international developments, the Bank pointed out that the U.S. dollar weakened and that prices of risky assets rose after the Federal Reserve did not increase U.S. interest rates in its last meeting. Nevertheless, the Bank noted that, “market volatility remains high.” According to the Bank, uncertainty surrounding the growth prospects of China and some Latin American economies, especially Brazil, increased and commodity prices showed mixed performance recently.

In the domestic arena, the Bank noted that inflation and core inflation are expected to remain at high levels, even though in September inflation came in below expectations. The Bank added that, “inflation expectations two years ahead are at 3%,” and that it would monitor its evolution carefully. At the same time, economic activity was weaker than expected in August, demand indicators remained subdued, and confidence indicators rested in pessimistic territory, despite a slight rise. The next monetary policy meeting is scheduled for 12 November.

Panelists participating in the LatinFocus Consensus Forecast see the policy rate at 3.28% at the end of 2015. Panelists expect the policy rate to end 2016 at 3.71%.

Author: Teresa Kersting, Economist

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Chile Monetary Policy Chart

Chile Monetary Policy October 2015

Note: Monetary Policy Rate (TMP, Tasa de Politica Monetaria) in %
Source: Chile Central Bank (BCC)

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