MercoPress. South Atlantic News Agency

Chile's Central Bank keeps benchmark interest rate at 5%

In July 2023, the Central Bank's Board made the first cut in the TPM, after stagnating it at 11.25% in December 2022

Chile's Central Bank Council unanimously voted Tuesday in favor of keeping the monetary policy interest rate (TPM) at 5% for the second month in a row amid high volatility in global financial markets after the recent change of government in the United States. Tuesday's decision halted a downward trend that had been going on for months.

Chile's Central Bank also highlighted the acceleration of activity in China during the fourth quarter of 2024.

The Board insisted that “although the general development of the macroeconomic scenario has been in line with what was considered, the risks to inflation have increased, which reinforces the need for caution” as the BCCh adopted international leisure standards.

The entity also stressed the current “scenario of high uncertainty is maintained” in Canada stemming from the change of government in the US.

Last month, the Chilean Bank underlined that long-term rates had grown globally as the dollar surged despite its recent weakening last week during which consumer and commercial bank loans were reviewed. The Central Bank explained that the recent inflationary dynamics have been influenced by the joint increase of several cost factors, such as the depreciation of the peso, higher labor costs, and the increase in electricity fares

In July 2023, the Central Bank's Board made the first cut in the TPM, after stagnating it at 11.25% in December 2022, after eleven consecutive hikes, amid a health pandemic and an economic crisis.

Regarding the domestic market, the report points to a growth in short and long-term nominal interest rates as the Chilean peso fell against the dollar with bank credit remaining weak. The Monthly Economic Activity Indicator grew by 0.3 points in November, driven by industry and agricultural exports, but job creation showed a low performance.

Last month, Chile's inflation went up by 4.5%, given the fall of the local peso, higher labor costs, and the increase in electricity fares, the Bank pointed out.