Peso Retreats as Chilean Central Bank Cuts Interest Rate

The Chilean peso fell against the US dollar today as the nation’s central bank reduced its key monetary policy interest rate yesterday for the fourth consecutive time.
The Central Bank of Chile announced an interest rate cut by 25 basis to 3 percent. Such decision was expected by most analysts.
The central bank was talking in the statement about slowing global growth, falling commodity prices (most notably in the energy sector) and accommodative monetary policies in developed countries.
As for the economy of Chile itself, the bank said:

Output, demand and employment indicators continue to reveal the low dynamism of the Chilean economy, in line with forecasts.

While loose monetary policy had its impact on the economy, Chilean policy makers have a difficult task of balancing between slow growth and high inflation, which stays above the upper bound of central bank’s tolerance range. Economists say that the bank now has neutral bias and further reductions of borrowing costs are unlikely.
USD/CLP was up 0.50 percent to 590.60 as of 22:45 GMT today.

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