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Montevideo, June 13th 2024 - 00:02 UTC

 

 

Chile's Central Bank lowers monetary policy interest rates

Friday, May 24th 2024 - 21:21 UTC
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The latest measures will take time to impact Chile's economy since mortgages will remain under previous, higher rates The latest measures will take time to impact Chile's economy since mortgages will remain under previous, higher rates

Chile's Central Bank decided to lower the monetary policy interest rate (TPM) from 6.5 to 6% and forecast additional cutbacks in the coming months. “Inflation has continued to decline, although at a moderate pace due to the high persistence of the services components,” the Central Bank's Board argued in its unanimous rationale given the annual price index 3.5% variation amid a downward trend.

The Central Bank's Board started backtracking the TPM in July last year after hitting 11.25% in December 2022 following 11 consecutive hikes under Covid-19 pandemic restrictions and economic crisis. From then on, the interest rate has been trending downwards, while the Central Bank considered that “the significant macroeconomic imbalances of previous years” were over.

Thursday's decision left the TPM at its nadir since March 2022, when the bank began to increase interest rates to combat inflation.

The Central Bank Board also highlighted that short-term interest rates already showed a reduction in the TPM, but mortgage rates, which depend on long-term calculations, were still high.

The latest move was also decided as Chile's economy has evolved in line with the Monetary Policy Report (IPoM) projections released in March. In addition, the Chilean peso has shown a notable appreciation compared to other currencies, driven by the increase in the price of copper.

While short-term loans and time deposits will be the first to adapt to the new MPR, mortgages will remain with high rates, similar to those observed in 2009. Hence, this week's announcements will take time to impact the South American country's economy.

Categories: Economy, Chile.

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