Wednesday, December 14, 2011

Central Bank of Chile Maintains Policy Rate at 5.25%

The Banco Central de Chile held its monetary policy interest rate unchanged at 5.25%.  The Bank noted: "Domestically, economic activity has evolved somewhat below projections, while domestic demand is still strong. Labor market conditions continue to be tight. Financial conditions are somewhat more constrained, reflecting the situation in global markets. Headline inflation has exceeded expectations somewhat, due to the incidence of fuels and foodstuffs. Core inflation figures remain contained. Inflation expectations are close to the target."

Chile's central bank previously also kept the monetary policy interest rate unchanged at 5.25% at its November meeting.  The Bank last raised its monetary policy interest rate by 25 basis points to 5.25% at its June meeting this year.  Chile reported annual consumer price inflation of 3.7% in October, compared to 3.3% in September, 3.2% in August, 2.9% in July, 3.4% in June, 3.3% in May and 3.2% in April this year; within the Bank's inflation target of 2-4%.  

The Chilean economy grew 8.4% in the first half of 2011, driven by strong domestic demand; full year GDP growth is expected around 6.5%, while inflation is seen around 4% by the end of the year.  The Chilean Peso (CLP) has weakened about 11% against the US dollar so far this year, while the USDCLP exchange rate last traded around 516.


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