Chile’s central bank slashed the benchmark interest rate by 50 basis points to 2% on Tuesday, the lowest in 9 years, citing a sputtering economy hurt by global trade tensions.
The decision, which the bank said was taken unanimously, reflects growing concerns in the world’s top copper producer about impacts from the deepening U.S.-China trade dispute.
The cuts were widely anticipated by the market. Growth in Chile stagnated in the first half of 2019, and inflation has hovered at the low end of the bank’s 2% to 4% target range.
The bank said the combination may prompt further monetary stimulus but said future cuts would depend on “the evolution of the macroeconomic scenario.”
Policymakers in many emerging markets have recently slashed interest rates, taking their lead from major central banks including the U.S. Federal Reserve and the European Central Bank.
The rate cuts are part of a broader effort across the developing world to shore up their economies amid global trade tensions.
Chile, which produces nearly one-third of the world’s copper, has suffered from floundering global prices for the red metal amid festering trade tensions. China is Chile’s top customer for copper.
Chilean officials have repeatedly downgraded expectations for growth in 2019, prompting the administration of center-right President Sebastian Piñera to implement US$ 3 billion in stimulus projects over the past several months.
The central bank in June slashed its view for Chile’s 2019 economic growth to 2.75-3.5%, from 3-4% earlier in the year.