Central Bank of Chile board increases interest rate by 50 bps to 2%

By Jennifer Chiou

New York, Aug. 13 - Central Bank of Chile said that its board decided to increase the monetary policy interest rate by 50 basis points to 2% annually at its monthly monetary policy meeting.

Overall, the external scenario facing the Chilean economy continues to be favorable, the board said, adding that commodity prices are still elevated.

According to a bank news release, uncertainty about the pace of recovery of world output has increased, and financial market volatility has remained high internationally.

The board noted that available data show significant output and demand domestically while unemployment has declined.

In July, the monthly CPI variation responded mainly to transitory phenomena, and the various measures of core inflation remained well contained, the bank said.

The release added that private expectations consider that in the short term, year-over-year inflation will be above the target, but toward the end of the policy horizon, they are consistent with levels around 3%.

The board said it will continue to reduce the current significant monetary policy stimulus at a pace that will depend on the unfolding of domestic and external macroeconomic conditions.

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