Chile lowered the rate to 6.5% and joins the regional trend

However, the rise in inflationary figures at the beginning of the year and the greater pressures on imported costs emphasize the need to continue closely monitoring its evolution. “To the extent that the shocks that affect inflation are transitory, the monetary policy framework based on a two-year target allows them to be accommodated within the policy horizon without putting inflationary convergence at risk.”

This is how the Chilean Central Bank justified its lowering of 75 basis points to the monetary policy interest rate to leave it at 6.5%in its most recent Monetary Policy Meeting (RPM)

This discount “It is a positive and prudent sign. Positive because it presents a scenario of control over inflation and incentive for economic activity. And prudent because the cut is in line with expectations with a view to continuing to analyze the behavior of the national and international economy in the coming months.“said Daniel Pardo, CEO of the Chilean fintech WBuild.

The decision, adopted unanimously by its members, is based on internal and external elements. Internally, the Chilean financial market has been affected both by trends in global markets and by the recent behavior of local inflation.

Since the last Meeting, short- and long-term rates have risen, the peso has depreciated and the stock market has increased. Regarding credit, interest rates on loans, especially commercial loans, have continued to reflect the transmission of the declines in the MPR. Mortgage rates, more linked to long-term rates, remain high.

The evolution of the Chilean economy

So far in 2024, Imacec data has shown growth above expectations. This is mainly associated with supply factors and a greater external impulse, although the services also had an impact. The labor market remains consistent with the trajectory of the cycle.

Employment and labor participation have continued to gradually improve. The unemployment rate remains somewhat above its historical average. The economic expectations of households and companies have improved slightly so far this year, although they remain in pessimistic territory.

Inflation in January and February exceeded expectations, which increased the annual variation of the CPI, a linked reference series, to 3.6% (3.2% in January). Inter alia, This evolution responded to the depreciation of the exchange rate, increases in external prices and readjustments of some local prices. The annual variation of the underlying measurement without volatiles fell to 4.2% annually (4.3% in January). Regarding inflation expectations in the two years, both the Economic Expectations Survey (EEE) and the Financial Operators Survey (EOF) are located at 3%.