Chile: Central Bank of Chile decreases rates in September
At its meeting on 3 September, the Central Bank of Chile agreed to reduce the monetary policy interest rate by 25 basis points to 5.50%. This takes total monetary easing since mid-2023 to 575 basis points.
Numerous factors likely drove the Central Bank’s decision, such as soft bank lending and consumer spending, a greater-than-anticipated economic slowdown in the second quarter, two-year inflation expectations in line with the 3.0% target, and currency appreciation since the previous meeting.
The Central Bank continued to suggest that the policy rate would be reduced going forwards. This is in line with our Consensus. Most panelists see more rate cuts by year end, with projections ranging from 25 to 100 basis points. However a few panelists see rates unchanged.
Giving their take on the meeting, Credicorp Capital analysts said:
“In our view, the authority now seems: i) convinced that the risks of inflation persistence are low, ii) more concerned about the slowdown in spending, iii) doubtful about the strength of the US economy, and iv) confident that 2-year inflation expectations will remain anchored to the target.”