Central Bank of Chile maintains a historical minimum rate

(Bloomberg) – Chile’s Central Bank kept its interest rate at a record low as the country slowly contained its worst coronavirus outbreak to date.

The bank’s board, led by its president, Mario Marcel, kept the rate at 0.5% on Thursday. All economists surveyed by Bloomberg anticipated this decision.

“The convergence of inflation to the target on the policy horizon continues to require that the monetary stimulus be highly expansionary,” the bank said in a note attached to today’s decision. “With this, the MPR will remain at its minimum of 0.5% for the time necessary for the recovery of the economy to finish taking hold.”

Chile’s Central Bank maintains its stimulus even amid forecasts of higher growth for 2021, driven by effective vaccine distribution, consumer demand supported by a third round of pension fund withdrawals and higher prices for the copper, which is the country’s main export. Simultaneously, the headwinds include high unemployment and a slower recovery in sectors such as services.

“The monetary policy committee remains committed to continuing to provide strong stimulus to ensure the consolidation of the uneven economic recovery,” Goldman Sachs Group Inc. analysts, including Alberto Ramos, wrote in a note ahead of the bank’s decision.

Economists raised their growth estimate for this year to 6.2%, according to the most recent central bank survey released this week. They also see year-end inflation of 3.3%, above the 3% target.

Rising commodity prices and inflationary pressures have led other countries to increase borrowing costs. Brazil has raised its rate twice this year and has signaled that there will be more increases in the future.

Weekend vote

Monetary policymakers are also keeping an eye out for what many expect will be a period of strained national policy. From May 15 to 16, citizens will vote for the members of the body that will draft a new constitution, as well as for the governors, mayors and councilors. The result is likely to shape the next presidential election scheduled for November.

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Since the central bank’s last rate decision in March, the government has eased some mobility restrictions, including parts of capital Santiago. Out of a total population of more than 18 million, more than 7 million Chileans have already received two doses of the vaccine.

Original Note: Chile Keeps Record-Low Key Rate as Recovery and Inflation Revive

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