Chile: Central Bank holds rate unchanged in November
November 17, 2016
At its 17 November 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, both of which have eroded the hawkish stance the Bank has held since December.
Regarding the domestic economy, the BCC stated that the evolution of economic activity in the third quarter was in line with the Bank’s expectations and that the labor market had showed gradual improvement. Regarding price developments, the Bank commented that inflation in October surprised on the downside by falling from 3.1% in September to 2.9%. This month, short-term inflation expectations were revised slightly downwards but the Bank still expects inflation to stabilize around the target of 3.0% in the medium term.
On the international front, the BCC commented that volatility in the financial market had intensified following the U.S elections and that the financial conditions in the emerging markets had deteriorated. The Bank noted that copper prices had increased on the back of an improved demand outlook. The BCC 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.
Author: Dirina Mançellari, Senior Economist