Chile: Central Bank hikes rates further in June
At its 7 June meeting, the board of the Central Bank of Chile (CBC) decided to hike the monetary policy rate by 75 basis points to 9.00%, taking total tightening this year to 500 basis points.
The Bank’s decision was driven by a desire to rein in inflation and inflation expectations. Inflation in April once again overshot the Bank’s estimations and rose further above its 3.0% target, with core price pressures also intensifying. Moreover, the Bank highlighted that market inflation expectations remained above the target over a two-year horizon. Moreover, in its accompanying monetary policy report, the CBC radically revised up its inflation forecasts for 2022, and now sees inflation averaging 10.8% for the year. In addition, the Bank judged that economic activity was easing at a softer rate than expected, providing the room to hike.
In its communiqué, the Central Bank stated that further rate hikes of a smaller magnitude would be necessary to tame inflation. This is in line with our panelists’ forecast for further tightening later this year.