Chile Monetary Policy April 2016

Chile

Chile: Central Bank holds rate at 3.50% in April

April 12, 2016

At its meeting on 12 April, the Central Bank of Chile (BCCH) decided to leave the policy rate unchanged at 3.50% where it has been resting since the Bank’s last rate hike of 25 basis points in December. The decision to maintain the current policy rate was taken against a backdrop of above-target inflation and subdued economic data.

As for the international environment, the Bank pointed out that financial markets were fairly calm recently, but that, nevertheless, risks persisted. Moreover, the Bank’s assessment regarding global growth remained broadly unchanged and it highlighted that commodities showed divergent developments recently.

Regarding Chile, the BCCH stated that inflation fell short of market expectations, coming in at 4.5% in March. The Bank forecasts that inflation will stay above 4.0% for the next months, then gradually decline to 3.0% over the course of the next two years. While economic activity was stronger than expected in February, business and consumer confidence remain depressed. Moreover, unemployment as well as employment growth were broadly stable, but wage growth decelerated.

In conclusion, the Bank stated that its monetary policy will remain focused on bringing inflation down to its 3.0% target. At the same time, the Bank left the door open for future rate hikes, but softened its hiking bias slightly by stating that the pace of eventual rate increases will, “depend on incoming information and its implications on inflation projections.” The next monetary policy meeting is scheduled for 17 May.

Panelists participating in the LatinFocus Consensus Forecast see the policy rate at 3.71% at the end of 2016. Panelists expect the policy rate to end 2017 at 4.03%.


Author: Teresa Kersting, Economist

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Chile Monetary Policy Chart


Chile Monetary Policy April 2016

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


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