Chile’s Central Bank President announces sharper rate cut and targets 8% by year-end
The President of the Central Bank of Chile, Rosanna Costa, recently announced that the country’s benchmark interest rate will decrease faster than expected, possibly ending the year around 8%.
In an interview with national newspaper El Mercurio, she outlined that despite the macroeconomy progressing as predicted, inflation rates are falling at a quicker rate.
As of June, the total inflation dropped to 7.6%, with core inflation decreasing to 9.1% annually.
Costa indicated that in the short term, the monetary policy rate (TPM) would reduce further than initially considered, expected to be around 7.75% to 8% by the end of the year.
The Central Bank’s council unanimously decided to lower the interest rate by 100 basis points to 10.25%, the first decrease since last October.
This reduction stands in contrast to the decisions made by leading central banks worldwide, who have been increasing rates and indicating a continued restrictive monetary stance.
Chile’s economy experienced a faster-than-expected recovery post-pandemic, with a historical increase of 11.7% in 2021.
However, economic growth slowed down in 2022, closing with an increase of 2.4%. Government-provided financial aid and early withdrawals from pension funds significantly boosted consumption and inflation, with the impacts of the Ukraine conflict also contributing.
Chile’s Central Bank estimates a GDP variation between -0.5% and 0.25% for the current year, and projects reaching the 3% goal by the end of 2024.
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