Thursday, March 19, 2015

Chile maintains rate, inflation still above target range

    Chile's central bank maintained its monetary policy rate at 3.0 percent, as expected, repeating that inflation is forecast to remain above its tolerance range for some months, a development that the central bank will continue to monitor "with special attention."
    The Central Bank of Chile, which has kept its rate steady this year after cutting it by 150 basis points in 2014 to stimulate economic growth, added that inflation in February exceeded market's expectation but medium-term inflation  expectations remain around the bank's 3.0 percent target.
    Chile's consumer price inflation rate eased slightly to 4.4 percent in February from 4.5 percent in January. The central bank's tolerance range is from 2.0 to 4.0 percent.
    On March 12 the central bank's governor, Rodrigo Vergara, said the central bank had no space for additional monetary stimulus in the foreseeable future but would use its policy tools to comply with its inflation mandate.

    The Central Bank of Chile issued the following statement:



"In its monthly monetary policy meeting, the Board of the Central Bank of Chile decided to keep the monetary policy interest rate at 3% (annual).

The economic recovery of the developed world, particularly the United States, is running on course, while prospects have deteriorated for the most part of Latin America. During the month, commodity prices dropped although there were some exceptions such as copper. International financial conditions for emerging economies worsened and the dollar strengthened further. Worth noting were the stronger monetary stimuli in several economies and, most recently, the cautious tone of the Federal Reserve’s communication.

As in the previous month, February’s inflation exceeded the market’s expectation. Core inflation remains high. In the most likely scenario, annual inflation is forecast to remain above the tolerance range for some months, a development that will continue to be monitored with special attention. Medium-term inflation expectations have remained around 3%. Output and demand indicators point at growth rates in line with those projected in the December Monetary Policy Report. Meanwhile, the unemployment rate increased slightly and nominal wages remained dynamic. Local financial conditions reflect the impact of the monetary stimulus.

The Board reiterates its commitment to conduct monetary policy with flexibility so that projected inflation stands at 3% over the policy horizon. Any future changes in the monetary policy rate will depend on the implications of domestic and external macroeconomic conditions on the inflationary outlook."

    www.CentralBankNews.info

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