Chile’s central bank cut its policy rate by another 25 basis points to 3.0 percent, as expected, and said there is a need for additional monetary stimulus due to the implication for inflation from the recent economic trends.
It is the second rate cut by the Central Bank of Chile this year, following a cut in January, bringing the total easing to 50 basis points. January’s rate cut was the first by the central bank since October 2014.
Today’s rate cut comes after the central bank in February said that the most likely scenario was that it would be necessary to boost the monetary impulse in the short term.
Chile’s inflation rate eased to 2.7 percent in February from 2.8 percent in January with inflation expectations in the coming months in the lower part of the central bank’s target range of 1.0 to 5.0 percent around a central midpoint of 3.0 percent.
Longer-term, inflation expectations remain around the target, the bank added.
Economic activity and demand remains weak, the central bank said, adding employment was deteriorating although the employment rate remains stable.
Chile’s economy grew by an annual rate of 1.6 percent in the third and second quarters of 2016 while the unemployment rate rose to 6.2 percent in January 2017 from 6.1 percent in December.
Chile’s peso has been depreciating since mid-February and was trading at 661.75 to the U.S. dollar today, up 1.1 percent since the start of this year.