Given the latest spike of inflation in Chile which jumped 1,2% in September, the central bank council surprised markets by increasing the basic monetary lending rate 125 points, that is from 1,5% to 2,75%, the highest since 2001. The five-member Council decision was unanimous.
The Consumer Prices Index, CPI, in Chile climbed 0,4% during August totaling 3,2% so far this year and 4,8% in the last twelve months, according to the country's stats office. It is the highest since January 2016, and the tendency is to continue increasing, as had been anticipated by the Central Bank. Likewise with the US dollar.
The Monetary Council of the Chilean central bank surprised markets on Monday by deciding to increase the basic interest rate 75 base points to 1,5%, the highest jump since August 2001. According to a bank release, the decision from the council was unanimous, and well beyond market expectations that had estimated an increase of 25 to 50 base points.
Chile's monthly report issued by the Central Bank Monday forecast inflation to close 2021 with a cumulative 3.2%, with no significant changes in sight for 2022 and 2023.
Chile’s peso tumbled on Wednesday, starting the year in a volatile fashion as many had forecast. The currency dropped 2.1% to 741.66 against the dollar, bringing its decline this year to 4%.
The continuing coronavirus pandemic poses the most significant risk to Chile’s financial system as institutions’ capacity to take mitigating action diminishes, the country’s Central Bank warned in a report on Wednesday.
Chile posted a trade surplus of US$ 904 million in August, the central bank said on Monday, with a drop in levels versus a year earlier of both exports and imports for the month.
Chile’s Congress has approved a law to allow the central bank to buy bonds issued by the country’s treasury in the secondary market, potentially giving the bank added firepower to help offset fallout from the COVID-19 crisis.
Chile's central bank announced a US$ 4 billion injection to stop a currency slide that saw the peso reach historic lows on successive days this week. The peso fell to 820 to the dollar at the close Thursday, breaking the 800 Pesos milestone.
Chile’s finance minister warned on Tuesday of the “grave consequences” for the nation’s economy of three weeks of often violent unrest after the peso slid 4% to hit a historic low against the dollar. Ignacio Briones said the weakening of the peso was a “sign of worry” that he and his colleagues were watching very carefully.