Home Chile BCCh Chile Central Bank Raises Benchmark Rate by 125bps to 4%, More Tightening Likely: Reuters

Chile Central Bank Raises Benchmark Rate by 125bps to 4%, More Tightening Likely: Reuters

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Chile Central Bank Raises Benchmark Rate by 125bps to 4%, More Tightening Likely: Reuters

SANTIAGO (Reuters) – Chile’s central bank hiked the country’s benchmark interest rate to 4.0% on Tuesday from 2.75% previously, as the Andean country’s economy rebounds strongly from the coronavirus pandemic and the government grapples with high inflation.

The move follows another bigger-than-expected 125 basis-point hike in October by the bank, the steepest in 20 years. Regional neighbors including Peru and Brazil have also been raising their rates this year to help tamp down rising prices.

The central bank said it had unanimously agreed to raise the benchmark interest rate by 125 basis points for the second time in a row, amid an accelerated withdrawal of monetary stimulus to temper inflationary pressures.

The increase in the Monetary Policy Rate (MPR) began in July, when the agency raised it by 25 points after holding it for more than a year at the technical minimum of 0.5%; it was increased to 1.5% in August and 2.75% in October.

“The Board foresees that the MPR will continue to rise in the short term, being above its nominal neutral level – the one that is consistent with the inflation target of 3% – for much of the monetary policy horizon,” the bank said in its statement.

Chile’s 12-month rolling inflation was clocked at 6.7% last month, well above the central bank’s tolerance range of between 2.0% and 4.0%. read more

The Tuesday rate hike was in line with a central bank poll of analysts, though it was slightly ahead of a 3.75% forecast from a separate traders’ poll also by the bank.

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