Thursday, September 11, 2014

Chile cuts rate again and may consider further stimulus

    Chile's central bank cut its monetary policy rate by a further 25 basis points to 3.25 percent and reiterated its recent that guidance that it would consider further monetary stimulus if necessary to ensure that inflation meets its target of 3.0 percent.
      The Central Bank of Chile, which has now cut its rate by 175 basis points since October last year, issued the following statement:

    "In its monthly monetary policy meeting, the Board of the Central Bank of Chile decided 
to lower the monetary policy interest rate by 25 basis points, to 3.25% (annual). 
Internationally, incoming information confirms the outlook of recovery of the United 
States, and the weakening of Eurozone growth. Growth forecasts for emerging Asia 
remain stable, while in Latin America there is confirmed weakness in a significant part 
of the region. External financial conditions continue to be favorable. The prices of a 
majority of commodities have dropped, while copper’s has remained fairly stable. 

    Output, demand and employment indicators continue to reflect the low dynamism of 
the Chilean economy. Even so, the unemployment rate remains low and the annual 
growth rate of nominal wages has risen further. In August, headline inflation remained 
at 4.5% annually. Medium-term inflation expectations remain around 3%, despite an 
increase for the figure expected for the end of this year. The most likely scenario 
continues to assume that inflation will stay above the upper bound of the tolerance 
range still for some months, to later return to the target. This evolution will continue to 
be monitored with special attention. Domestic credit conditions continue to be 
favorable in general, partly reflecting the impact of the monetary stimulus. 

    The Board will consider the convenience of introducing further monetary stimulus in 
line with the evolution of domestic and external macroeconomic conditions and its 
implications on the inflationary outlook. At the same time, the Board reiterates its 
commitment to conduct monetary policy with flexibility, so that projected inflation 
stands at 3% over the policy horizon. "


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