Central Bank of Chile Cuts Rate 25bps to 5.00%

The Banco Central de Chile cut its monetary policy interest rate by 25 basis points to 5.00% from 5.25% previously.  The Bank noted: "Domestically, output and demand have evolved in line with forecasts in the latest Monetary Policy Report. The labor market is still tight. The money market has normalized, while financing conditions for some agents are tighter than a few months ago. December's headline and core inflation was higher than expected due to the prices of perishables and other foods and the lagged incidence of the peso depreciation in the fourth quarter of 2011. Inflation expectations remain near the target."

Chile's central bank previously kept the monetary policy interest rate unchanged at 5.25% at its December meeting.  The Bank last raised its monetary policy interest rate by 25 basis points to 5.25% at its June meeting last year.  Chile reported annual consumer price inflation of 3.7% in October, compared to 3.3% in September, 3.2% in August, 2.9% in July, 3.4% in June, 3.3% in May and 3.2% in April last year; within the Bank's inflation target of 2-4%.  

The Chilean economy grew 8.4% in the first half of 2011, driven by strong domestic demand; full year GDP growth is expected around 6.5%.  The Chilean Peso (CLP) has weakened about 2% against the US dollar over the past year, while the USDCLP exchange rate last traded around 501.

www.CentralBankNews.info