Chile: Central Bank holds rate at 3.50% in October
October 18, 2016
At its 18 October monetary policy meeting, the Central Bank of Chile (BCC) kept the policy rate unchanged at 3.50%, where it has rested since the Bank hiked it by 25 basis points in December of last year. The decision to maintain the policy rate unchanged came as inflation neared the Central Bank’s target sooner than expected and economic weakness persisted in Q3, which have eroded the hawkish stance held by the Bank since December.
About the Chilean economy, the BCC stated that inflation in September surprised on the downside by falling to 3.1% from 3.4% in August, which was sooner than anticipated. The Bank noted that several indicators pointed to inflation stabilizing around the target of 3.0% in the medium term. Meanwhile, monthly data point to economic weakness, with lackluster demand and output in the third quarter. On the labor market, the Bank saw a gradual adjustment in unemployment levels.
On the international front, the BCC suggested that monetary and financial conditions remain encouraging and pointed to a gradual recovery of global economic growth next year. The Bank noted that commodity prices rose during the month, especially those of oil.
The Bank reaffirmed that its monetary policy will remain focused on ensuring that inflation meets its target and reiterated that changes will be subject to the implications of domestic and external macroeconomic conditions and developments. The next meeting is scheduled for 17 November.
Author: Dirina Mançellari, Senior Economist