Skyline in Chile

Chile Monetary Policy May 2021

Chile: Central Bank holds its ground in May

At its 12–13 May meeting, the board of the Central Bank of Chile unanimously decided to keep the monetary policy rate unchanged at 0.50%, its lowest point since 2009. The decision matched market analysts’ expectations and included the continuation of unconventional liquidity measures to sustain the recovery.

Although both headline and core inflation averaged around 3.0% in March–April and the Bank noted the economy was performing better than previously expected, it decided to continue its ultra-loose monetary policy stance in order to keep inflation close to the 3.0% target over the policy horizon.

Moving forward, the Bank stated its intention to maintain the policy rate at 0.50% “for as long as it is deemed necessary for the recovery of the economy to take hold”. However, this appeared to be a slightly more hawkish tone compared to the previous meeting in March, as the Bank dropped both a timing reference and an additional condition for moving away from its current ultra-loose stance.

Commenting on the Central Bank’s decision, Diego W. Pereira and Lucila Barbeito, economists at JPMorgan, stated:

“We entertain the monetary policy rate at 1.0% by year-end. We believe the CBC will prioritize gradualism when it comes to the policy rate path ahead, which argues for starting the cycle earlier rather than permitting substantial deviations of inflation expectations from target. […] This strategy would be consistent with the policy rate at 2.0% by end-2022. Granted, scenarios of heightened and persistent political premium and/or a shift in the Fed stance could force the Central Bank to exit negative real rates quicker than envisioned.”

The next monetary policy meeting is scheduled for 8 June.

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest X Download Fullscreen