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Chile promises record policy rate until recovery takes hold
(Bloomberg) – Chile’s central bank has kept its benchmark interest rate at an all-time high and said borrowing costs will stay at that level for as long as needed for the economic recovery to strengthen. overnight rate at 0.5% on Thursday. In an accompanying statement, policymakers wrote that the economic outlook has improved. “Converging inflation towards the target on the political horizon still requires that monetary stimulus be very expansionary,” the policymakers wrote. They added that the policy rate “will be kept at its minimum of 0.5% for as long as it is deemed necessary for the recovery of the economy to take hold”, while dropping a benchmark earlier than a period of several quarters. . the change is undoubtedly more hawkish, ”said Sergio Godoy, chief economist at STF Capital. “While it is not clear whether they will hike rates this year, it is now more likely to happen.” demand sustained by a third round of pension fund withdrawals and a rise in the price of copper, the country’s first export. On the other hand, headwinds include high unemployment and a slower recovery in sectors, including services. What Bloomberg Economics Says “The central bank is more constructive about the economic outlook and remains confident that inflation will stay on target. With the forecast, the outlook supports the central bank’s expectations to maintain the benchmark interest rate in the short term and start slowly increasing it early next year. – Felipe Hernandez, Latin America economist 3% target Private sector economists have raised their growth estimate for that year to 6.2%, according to the latest central bank survey released this week. They also note an inflation of 3.3% at the end of the year, above the target of 3%. Recent prices have been driven by food and gasoline, and council members noted “that there has been consistently high demand as well as production and supply difficulties for several commodities.” Brazil has raised its policy rate twice this year and has signaled more hikes to come. Policymakers are also on hold as Chile enters what many expect to be a period of tense national politics. On May 15 and 16, citizens will vote for members of the body that will draft a new constitution, as well as governors, mayors and city council members. The result is likely to shape the next presidential elections scheduled for November. Since the central bank’s last rate decision in March, the government has relaxed some restrictions on mobility, especially in parts of the capital, Santiago. More than 7 million Chileans have already received two doses of the vaccine, out of a total population of over 18 million. (Re-casts story, add quotes from economists in 4th and 6th paragraphs) Subscribe now to stay ahead with the most trusted source of business news.