Chile’s Central Bank has significantly lowered its key interest rate by a full point, quickening monetary easing efforts for another round.
Economists see this as a step towards achieving inflation targets soon.
Rosanna Costa and her team cut the rate to 7.25% recently, aligning with 17 out of 21 Bloomberg analysts’ predictions.
A few expected less or more drastic cuts, but the consensus was a significant reduction.
Since July, the bank has cut rates by four points, aiming to hit a 3% inflation target while the economy slowly picks up.
Compared to its Latin American peers, Chile had more room to ease its policy due to its tougher economic slump last year.
A drop in both total and core inflation rates in December spurred hopes for deeper cuts.
The core CPI’s drop to -0.2% in December 2023 played a big role in this decision, as noted by Leonardo Suárez from LarrainVial.
He pointed out that Chile’s economy saw no growth last year, with internal demand falling significantly.
This move is crucial, as it signals Chile’s aggressive approach to revitalizing its economy and stabilizing prices.
Chile’s strategy, responding to unique economic challenges, stands out amid a broader Latin American trend.
Strategy targets inflation control, fostering economic recovery, emphasizing the link between monetary policy, economic health, and inflation targets.