Chile: Central Bank leaves monetary policy rate at technical minimum in May
May 6, 2020
At its monetary policy meeting on 6 May, the board of the Central Bank of Chile (BCCh) left the monetary policy rate unchanged at 0.50%, its lowest point since 2009. The decision, which was unanimous, came in line with analysts’ expectations and followed a 50-basis-point cut in their previous meeting on 31 March.
The decision to leave the monetary policy rate at its technical minimum reflected the need to minimize the economic fallout posed by the Covid-19 pandemic. Inflation logged 3.7% in March (February: 3.9%), remaining within the 2.0%–4.0% target band and looks set to fall ahead as a result of shrinking economic activity and plummeting energy prices. Meanwhile, the unconventional liquidity measures deployed in March have so far helped commercial lenders meet the jump in demand for credit, particularly by large corporates, at relatively low interest rates.
Going forward, the Bank expects to maintain the policy rate at 0.50% for a long period of time in order for inflation to converge to the midpoint of the target band in the next two years. Furthermore, the Bank will evaluate additional unconventional tools to further boost liquidity and maintain financial stability, if required.
The next monetary policy meeting is scheduled for 16 June.
Author: Nicolás J. Aguilar, Economist