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Chile maintains rate, confirms neutral guidance

Tuesday, October 18, 2016 16:22
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    Chile’s central bank left its monetary policy interest rate 3.50 percent, confirming its neutral guidance that future rate changes depend on the inflationary outlook.
    The Central Bank of Chile, which has maintained its rate this year after raising it by 50 basis points in 2015, most recently in December, noted that inflation in September was “unexpectedly low” so inflation approached its 3.0 percent target sooner than expected.
     Chile’s inflation rate eased further to 3.1 percent in September from 3.4 percent in August and the central bank said expectations revolve around the bank’s target. The central bank targets inflation of 3.0 percent within a 2 – 4 percent range.
     In August the central bank dropped its tightening bias that it had maintained since December as inflation continued to decline, with inflation in August falling below the central bank’s upper limit for the first time since November 2015.

    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 3.5%.
Internationally, monetary and financial conditions are still favorable and long-term interest rates remain low. On the activity side, incoming data brought no big news, pointing to a gradual recovery of world growth next year. Despite fluctuations, the prices of commodities rose during the month, especially oil.

On the domestic front, September’s CPI was unexpectedly low, making annual inflation approach 3% sooner than expected. Various expectations indicators place inflation around the target in the projection horizon. Partial third-quarter data continue to point at limited growth in output and demand, consistent with the Monetary Policy Report’s baseline scenario. The labor market continues to adjust gradually.
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.”


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