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Chile Monetary Policy March 2021

Chile: Central Bank stays put in March

At its 30 March meeting, the board of the Central Bank of Chile unanimously decided to keep the monetary policy rate unchanged at 0.50%, its lowest point since 2009. The decision matched market analysts’ expectations and included the continuation of unconventional liquidity measures to sustain the recovery.

Volatile inflationary pressures in January-February and a stronger-than-expected, albeit still uneven, economic recovery in Q4 2020 and in the first quarter of this year were behind the Central Bank’s decision to maintain its ultra-loose monetary policy stance.

Moving forward, the Bank stated its intention to maintain the policy rate at 0.50% for several quarters, “until the recovery of the economy takes hold and spreads to the more lagging components of expenditure”. However, this appeared to be a slightly more hawkish stance compared to the previous meeting in January, when the Bank said the rate would stay unchanged “over most of the two-year monetary policy horizon”.

Analysts at Goldman Sachs stated:

“The hawkish twist in today’s policy statement is consistent with our recent revision of the policy rate call in Chile, where we now expect the MPC to hike the policy rate by 75bp to 1.25% by year-end, with another 125bp to 2.50% by end-2022.”

The next monetary policy meeting is scheduled for 5–6 May.

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