Chile: Central Bank holds rate steady in July
At its 18 July monetary policy meeting, the board of the Central Bank of Chile (BCCh) decided to keep the key policy rate unchanged at 2.50%, in line with analysts’ expectations and on the heels of an abrupt 50 basis points cut in early June. Notably, one member out of the five-member board opposed the decision, favoring instead an additional 25-basis-point cut.
Although inflation remained weak in the second quarter on a surprising drop in prices for services, policymakers were wary to hasten another rate cut and instead opted for a wait-and-see approach. Lackluster mining activity and an unfavorable external backdrop in Q2 took a toll on domestic demand, quelling prices pressures in the process.
Looking ahead, however, the board decisively stated it would cut the rate if sustained downside risks to inflation, stemming from sluggish service price inflation and subdued domestic demand, persist. Moreover, policymakers reiterated the Bank’s commitment to a flexible monetary policy stance ahead, in order to reach the 3.0% inflation target in a two-year horizon.
The next monetary policy meeting is scheduled for 3 September.