Thursday, December 12, 2013

Chile holds rate, says economy losing strength

    Chile's central bank held its policy rate steady at 4.50 percent, as expected, saying any future rate changes would depend on the "implications of domestic and external macroeconomic conditions on the inflationary outlook."
    The Central Bank of Chile, which cut rates in October and November by a total of 50 basis points to counter slowing growth, said the country's economy had been losing strength, with output growing slightly below trend.
    Chile's Gross Domestic Product expanded by 1.3 percent in the third quarter from the second for annual growth of 4.7 percent, up from 4.0 percent in the second quarter.
     Recent indications were consistent with inflation returning to the bank's 3.0 percent target, the bank added. Chile's inflation rate rose to 2.4 percent in November, up from 1.5 percent in October.
    The bank added that the Chilean peso had depreciated and international financial conditions were tighter than in the first part of the year, or in previous years, "with harsher effects on those more vulnerable emerging economies."    Chile's peso fell sharply in May, along with many other emerging market currencies, and then stabilized until late October when it started falling again following the central bank's first rate cut.
    The peso was trading at 530.99 to the U.S. dollar today, down almost 10 percent since the end of 2012 when it was trading at 479.05.
    In its latest quarterly monetary policy report, the central bank cut its 2014 growth forecast to 3.75-4.75 percent from 4-5 percent while growth for this year was seen at 4.2 percent, down from 5.6 percent in 2012.
    The central bank also described its current policy rate as neutral and that it didn't foresee any "significant" rate changes.
    Inflation is projected to hit the bank's 3.0 percent target by the last quarter of 2015.


Post a Comment