Yesterday Chilean central bank increased its interest rate by 0.25 basis points up to 6.0%. It was the first rate hike in Chile since September 13 this year.
Central bank has been on its quest to destroy the risks of elevated inflation levels since July. But the break which occurred during October-November gave the traders a hint that upward cycle in the interest policy is ending; the December decision was expected to be passive – without any changes to the monetary policy.
But accelerating inflation (based on the high oil prices), which has already reached annualized rate of 7.4%, prompted more aggressive actions from the Central Bank of Chile. They see the rate increase as the only way to reach central bank’s target inflation:
This decision is necessary to reduce the propagation risks of current high inflation to costs and expectations, in order to insure that annual inflation will converge to 3% over the policy horizon.
Although the economy growth has been lower than was expected by the central bank’s analysts, the overall domestic economical conditions remain moderately good. The Board of the Central Bank of Chile is convinced that the current interest rate change shouldn’t affect the Chile output progress.
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