Chile: Central Bank keeps rates unchanged in February
February 14, 2017
At its 14 February policy meeting, the Central Bank of Chile (BCC) decided to keep the policy rate unchanged at 3.25%, having cut rates by 0.25 percentage points in the previous month in response to sluggish domestic growth and declining inflation.
There was little change on the domestic front compared to the previous month. The BCC highlighted that the economy continues its low-growth trajectory, with recent data showing that internal demand and economic activity remained weak and labor market tendencies were unaltered. The Bank highlighted that inflation in January was in line with expectations at 2.8%. The BCC expects inflation to return to target over the forecast horizon, although over the next few months it is predicted to remain towards the lower end of the Bank’s 2.0%-4.0% target band. The Bank also highlighted the appreciation of the peso, which is most likely due to the recent increase in copper prices as a result of supply issues, in particular strikes at the country’s Escondida copper mine.
On the international front, the BCC commented that global financial conditions have continued to improve, with a further rise in asset prices in emerging markets thanks to strong economic performances from some developing countries in Latin America. Regarding commodities, the Bank signaled that copper prices have picked up recently, with oil prices staying relatively stable. According to the BCC, global indicators show that a recovery is still on the cards, despite lingering risks to the worldwide economic outlook.
Author: Oliver Reynolds, Economist