Tuesday, December 14, 2021

Chile raises rate 4th time and sees further increases

       Chile's central bank raised its key main interest rate for the fourth time and said it expects the rate will continue to be increased in the short term to above its neutral level to ensure inflation declines towards the bank's target of 3.0 percent.
      The Central Bank of Chile (CBC) raised its monetary policy interest rate (MPR) by 1.25 percentage points to 4.0 percent and has now raised it 3.50 percentage point this year following rate hikes in July, August, October and today.
      As in previous decisions, the bank's board was unanimous.
      Inflation in Chile rose for the 8th consecutive month to 6.7 percent in November from 6.0 percent in October - the highest rate since January 2009 - with CBC noting that volatile prices, especially of food and services, jumped 10.5 percent.
      Inflation expectations have also risen in recent months and although they point to an easing of inflation towards 2023, over the next two years they remain above the 3.0 percent target, CBC said, adding tomorrow's monetary policy report will include details of the inflation forecast and the outlook for MPR.
      As forecast in the bank's previous policy report from September, economic activity was dynamic in the third quarter as domestic demand grew more than expected, while investment in machinery and equipment also showed a high level while construction recovered from pre-pandemic levels.
      The monthly Imacec index of economic activity showed growth of 15 percent in October and CBC private expectations for growth this year have been raised to 11.9 percent from 11.0 percent.
     In the third quarter of this year Chile's gross domestic product grew 17.2 percent year-on-year, down from 18.1 percent in the second quarter.


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