Chile Keeps Monetary Policy on Hold

The Central Bank of Chile left its benchmark interest rate on hold at 3.5 percent on June 16th for the fifth straight meeting as widely expected. Policymakers said, inflation will continue to be watched with special attention. The bank also mention the volatility of financial markets as a result of upcoming UK referendum and the Federal Reserve’s monetary policy decision.

Statement by the Central Bank of Chile:

International financial markets remain volatile, very influenced by the upcoming referendum in the UK and the discussion around the Federal Reserve’s monetary policy decision. Long-term interest rates have dropped in the main economies. Globally, stock markets are down and the prices of many commodities have risen. Copper has been an exception. The dollar, with ups and downs, is near where it was last month. The world growth outlook presents no significant changes.

On the domestic front, in May’s CPI variation was somewhat smaller than expected and y-o-y inflation remained at 4.2%. Expected inflation two years ahead remains at 3%. The evolution of these variables will continue to be monitored with special attention. Partial second-quarter output and demand data reflect limited growth. Confidence indicators are still in pessimistic territory, salaried employment is growing at a slow pace, the unemployment rate is still low and nominal wages have slowed.

The Board estimates that, to ensure the convergence of inflation to the target, monetary policy will need to continue to normalize, at the pace that is implicit in the latest Monetary Policy Report’s baseline scenario. Nonetheless, a significant deviation of inflation’s convergence may change said pace. The Board reiterates its commitment to conduct monetary policy with flexibility, so that projected inflation stands at 3% over the policy horizon.

Chile Keeps Monetary Policy on Hold

Central Bank of Chile | Mojdeh Kazemi |
6/16/2016 11:26:39 PM