Chile’s central bank decided to cut its referential interest rate by 100 base points to 10.25%, above what was expected by the market, at the beginning of an expected reduction cycle due to lower inflationary pressures.
The Andean country’s central bank was the first in Latin America to cut its interest rate.
Chile’s central bank kept the TPM at the technical maximum of 11.25% for nine months to contain the strong inflationary pressure that caused the rapid recovery of activity after the COVID-19 pandemic.
“The performance of activity and demand does not show significant differences from what was expected. However, inflation declined somewhat quicker than envisaged in the central scenario of the Monetary Policy Report (IPoM),” the central bank stated in an official statement.
Consumer prices fell a surprising 0.2% in June, which led the annual rate indicator to accumulate an advance of 7.6%, less than the 8.7% of the previous month.
“The Council estimates that, in the short term, the TPM will accumulate a reduction somewhat greater than that considered in the central scenario of the IPoM,” the statement explained.
Most of the market expected a reduction in key interest to 10.5%, although some were betting that the body could be more aggressive.
A survey of operators published this week by the Central Bank showed that those consulted expected, in addition to the 75 points at this meeting, another cut of 100 basis points for the meeting on September 5.
In June, the bank lowered the top of the expected range for gross domestic product (GDP) this year to between a fall of 0.5 and a rise of 0.25%.
