Chile’s central bank has taken a more cautious approach, reducing the pace of interest rate cuts amid inflation risks stemming from increased economic activity and a weaker peso.
The bank lowered its interest rate by 0.75 percentage points to 6.5%, in line with expectations. They emphasized that future reductions will depend on economic conditions and inflation trends.
Rising inflation and higher import costs have prompted the bank to closely monitor economic developments. Despite recent growth in sectors like manufacturing and retail, challenges persist, including higher-than-expected consumer prices and elevated unemployment.
The depreciation of the peso has contributed to faster inflation, alongside global cost pressures. This has raised concerns about potential import price increases in the coming months.
Unlike previous statements, the bank refrained from specifying when interest rates would reach a neutral level.
Economists and traders expect inflation to stabilize next year, according to surveys. The bank will provide updated forecasts in its upcoming monetary policy report.
Central bankers also highlighted global inflation risks, particularly in transportation, fuel, and services. They noted the Federal Reserve’s cautious stance, which could impact Chile’s monetary policy decisions.
Overall, the central bank’s tone has shifted towards a more moderate approach compared to previous meetings, reflecting increased vigilance amidst uncertain economic conditions.
