Chile: Central Bank reduces policy rate
March 13, 2014
At its 13 March meeting, the Central Bank decided to cut the policy rate by 25 basis points from 4.25% to 4.00%. The decision was broadly in line with market expectations. This is the second consecutive meeting in which the Bank decided to cut its policy rate in order to stimulate the economy. The Bank stated that slowing demand from China has had a negative impact on metal prices, in particular the price of copper. The loss of momentum in Chile's economy reflects falling domestic output and decelerating domestic demand. Regarding price developments, the Central Bank stated that, “annual inflation has increased, reflecting higher prices for foodstuff and fuels, and the depreciation of the peso.” Nevertheless, Bank's inflation expectations are still near the Bank's range of 3.0% plus/minus 1.0 percentage points. LatinFocus Consensus Forecast panelists see the policy rate at 4.50% by the end of the year. Panelists expect the policy rate to end next year at 4.06%.
Author: Dirina Mançellari, Senior Economist