Chile's central bank left its monetary policy rate steady at 3.25 percent but repeated its guidance from last month that it was considering further rate hikes to ensure that inflation converges towards its target with the pace of any policy change dependent on new data.
The Central Bank of Chile, which raised its rate by 25 basis points in October, added that inflation in October was "somewhat" higher than expected and it would continue to monitor inflation and inflationary expectations "with special attention."
Chile's headline inflation rate eased to 4.0 percent in October from 4.6 percent in September but the bank said core inflation had surprised it.
Core inflation eased to 5.1 percent in October from 5.4 percent in September while the central bank said its preferred measure of CPIEFE was 4.8 percent in October.
The central bank added that data for the third quarter of this year showed that output and demand were evolving in line with its expectations, with confidence improving marginally but still in pessimistic territory.
"Private job creation and wage growth remain dynamic," the bank said.
Chile's Gross Domestic Product was stagnant in the second quarter from the first for annual growth of 1.9 percent, down from 2.5 percent in the first quarter.
Chile's peso has been depreciating against the U.S. dollar since May 2013 and a rise in its value following the October rate hike quickly petered out.
Today the peso was trading at 701.7 to the dollar, down 13.6 percent this year.
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 maintain the monetary policy interest rate at 3.25%.
Internationally, recent information confirms stronger growth in developed economies and less
dynamic emerging markets. Available information on the United States reveals a higher probability
of the first policy rate increase by the Federal Reserve occurring in December. As anticipated as
this event has been, risks of possible disruptions in the markets persist. In general, commodity
prices declined during the month.
On the domestic front, October’s CPI inflation was somewhat higher than expected, with a
surprise centered on core inflation (CPIEFE). Annual CPI and CPIEFE inflation was 4% and 4.8%,
respectively. Inflation expectations two years ahead remain at 3%. The evolution of these variables
will continue to be monitored with special attention. Third-quarter indicators showed that output
and demand evolved in line with forecasts in the last Monetary Policy Report. Confidence
indicators posted a marginal increase, but remain in pessimistic territory. Private job creation and
wage growth remain dynamic.
The future path of the monetary policy rate considers additional adjustments aimed to ensure the
convergence of inflation to the target, at a pace that will depend on incoming information and its
implications on inflation. The Board reiterates its commitment to conduct monetary policy with
flexibility, so that projected inflation stands at 3% over the policy horizon."