Chile’s central bank on Wednesday raised its key interest rate for the eleventh consecutive month to 11.25 percent from 10.75 percent to curb inflation, the highest level since 1998.
“The monetary policy rate has reached the peak of the cycle initiated in July 2021 and will remain at this level for as long as necessary to ensure the convergence of inflation with the target over the two-year monetary policy horizon,” the central bank’s board said in a statement.
According to official data, inflation stood at 13.7 percent in September, far from the central bank’s target range of 3 percent, due to rising food prices.
In such a scenario, the central bank’s board decided at its monthly monetary policy meeting to raise the interest rate by 50 basis points, the highest level since 1998, as “the outlook for global growth and international financial conditions has deteriorated.”
“Risks to the macroeconomic scenario are elevated, and their short- and medium-term implications need to be carefully assessed,” the report said.
The central bank’s decision took into account persistent global inflation, increases in benchmark interest rates by central banks, and expectations pointing to continued monetary tightening in advanced economies.
The central bank pointed to the high volatility of global financial markets, the global appreciation of the dollar, and fluctuations in commodity prices.
The central bank noted that the financial market had followed the recent global trend at the local level.
Bank lending has slowed due to tighter supply and weaker demand, especially in trade, industry, and construction.
In this regard, it stated that it would monitor the evolution of these events closely and keep monetary policy “flexible” so that projected inflation returns to the established range.