Chile's central bank held its
benchmark interest rate at 3 percent on Tuesday, as expected,
but said above-target inflation and other economic indicators
will likely prompt a tightening of policy in the short term.
"The board considers that the convergence of inflation to 3
percent over the (two-year) policy horizon will call for a
reduction in the high monetary stimulus currently in place," the
bank's post-meeting statement said.
"Considering incoming data, it is foreseen that this process
will begin shortly," it added, noting it will continue to
monitor the evolution of inflation with "special attention."
The statement signals a shift in tone as the central bank
had said earlier this month that it assumed a scenario in which
it would start withdrawing its monetary stimulus at the end of
2015 or early 2016.
The bank has kept the main rate at 3 percent
since October 2014, caught between a weak economy and fears of
fanning stubbornly high inflation.
Inflation in Chile posted its biggest monthly jump in nearly
a year in August, pushing the annual figure to 5 percent, well
above the central bank's target range, ratcheting up pressure on
monetary policymakers to hike interest rates sooner rather than
later.
"The next movements of the monetary policy rate will depend
on the upcoming inflation data, though we believe soft domestic
(economic) activity and a worsening external scenario cannot be
ignored in this analysis," said Banco Santander in a note to
clients.
Chile's central bank held itsbenchmark interest rate at 3 percent on Tuesday, as expected,but said above-target inflation and other economic indicatorswill likely prompt a tightening of policy in the short term. "The board considers that the convergence of inflation to 3percent over the (two-year) policy horizon will call for areduction in the high monetary stimulus currently in place," thebank's post-meeting statement said. "Considering incoming data, it is foreseen that this processwill begin shortly," it added, noting it will continue tomonitor the evolution of inflation with "special attention." The statement signals a shift in tone as the central bankhad said earlier this month that it assumed a scenario in whichit would start withdrawing its monetary stimulus at the end of2015 or early 2016. The bank has kept the main rate at 3 percentsince October 2014, caught between a weak economy and fears offanning stubbornly high inflation. Inflation in Chile posted its biggest monthly jump in nearlya year in August, pushing the annual figure to 5 percent, wellabove the central bank's target range, ratcheting up pressure onmonetary policymakers to hike interest rates sooner rather thanlater. "The next movements of the monetary policy rate will dependon the upcoming inflation data, though we believe soft domestic(economic) activity and a worsening external scenario cannot beignored in this analysis," said Banco Santander in a note toclients.
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