SANTIAGO (Reuters) -Chile’s central financial institution reduce its benchmark rate of interest on Tuesday by 75 foundation factors to six.50%, in a unanimous choice by its governing board, saying the speed would possible be decreased additional.
The reduce is in step with forecasts in a merchants’ ballot final week, which additionally predicted that the financial institution will cut back the speed to 4.25% inside 12 months.
In an announcement, the financial institution mentioned it foresees additional financial coverage charge cuts, with the dimensions and timing of these strikes considering the “evolution of the macroeconomic state of affairs and its implications for the trajectory of inflation.”
The central financial institution raised rates of interest from 0.50% in mid-2021 to a cycle-high of 11.25% in late 2022. The financial institution held that charge for nearly a yr earlier than kicking off financial easing final July as inflation started to chill.
Chile’s annual inflation peaked at 14.1% in August 2022 and got here down to three.9% on the finish of 2023. It has since gone again up, reaching 4.5% in February.
The central financial institution’s board on Tuesday added that inflation expectations are aligned with its 3% goal, and that “rising inflation figures at the start of the yr and better imported price pressures emphasize the necessity to proceed carefully monitoring its evolution.”
Whereas Chile confronted a pointy financial downturn in 2023 after a fast post-pandemic restoration, the economic system “has succeeded in closing the numerous macroeconomic imbalances of earlier years,” the board mentioned.
Information printed by the central financial institution on Monday confirmed that Chile’s financial exercise index posted its largest year-on-year enhance in nearly two years in February.