Chile's Central Bank Lowers Monetary Policy Interest Rate To 8.25%

Chile's central bank announced a cut in its benchmark interest rate to 8.25% Tuesday. This comes as the country's monetary authority sees a decrease in inflation pressures.

The bank noted in a statement that the global financial condition of the country evolved in recent weeks, which helped reverse the "significant tightening observed at the time of the October Monetary Policy Meeting," adding that compared to that month, U.S. long-term interest rates have been reduced to less than 4%.

According to the bank, this downward trend has been passed on to other nations worldwide. As a result, the value of the dollar has depreciated globally, while stock markets have experienced significant growth.

"The oil price fell to around US$75 a barrel and the copper price returned to values around US$3.8 a pound," the bank said.

As per the board members of the bank, inflation continues to decline with annual variations in the total and core CPI (Consumer Price Index) standing at 4.8 and 6.0%, respectively. However, the bank noted that the inflation exceeded the expectations due to volatile prices.

Based on the inflation predictions for the next two years, both the Economic Expectations Survey (EES) and the Financial Traders Survey (FTS) should remain at 3%.

"The macroeconomic scenario has evolved in line with expectations. The economy has been resolving its imbalances from previous quarters and inflation continues to reduce," the bank stated. "The Board reaffirms its commitment to act with flexibility in the event that any of the internal or external risks materialize and macroeconomic conditions so require."

Despite expert predictions that it would reach 0.2%, Chile's inflation rate last month was 0.7%.

"In this context, it is still projected that inflation will converge to the 3% target in the second half of 2024, but convergence to 3% for core inflation is anticipated for the first half of 2024 —component that has accumulated downward differences since the September Report," as per Central Bank.

Inflation directly impacts the purchasing power of the people as it increases the prices of goods and services than before. Chile has been experiencing fluctuations in its inflation rate over the years.

Aside from taking care of the inflation rate, Chile is also actively working towards curbing the impact of climate change. Last month, the country permanently banned hikers from visiting Patagonia's popular glacier amid the ongoing climate change crisis.

Chilean President Gabriel Boric also visited Antarctica with the Secretary-General of the United Nations, Antonio Guterres to observe the climate change impact on the continent last month.