Central Bank of Chile hikes monetary policy rate by 50 bps to 4½%

By Marisa Wong

Madison, Wis., April 13 - The Central Bank of Chile said its board decided to raise the monetary policy interest rate by 50 basis points to 4½% at its monthly monetary policy meeting.

The bank highlighted that internationally the prices of oil and food have remained high.

"Recent developments in Portugal have not deteriorated confidence in world markets, although financial risks in Europe are still cause for concern," the bank said in a press release.

"Developed economies continue to grow and emerging markets remain dynamic. Globally, headline and expected inflation have increased and a growing number of economies have reduced their monetary stimulus," the bank added.

The board noted that domestically, there has been progress in output, demand and employment, and inflation has behaved as forecasted.

"However, the rise in international commodity prices, in particular that of oil, are keeping short-term private inflation expectations high," the bank said.

The board repeated from its previous report that it will need to continue to reduce the monetary stimulus in coming months. The pace will depend on the unfolding macroeconomic conditions, the bank said.

Accordingly, the board said it will continue to use its policies with flexibility so that projected inflation stands at 3% over the policy horizon.

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