Despite the fact that consumption and headline consumer price readings are moving in the right direction, Chile central bank stated that there is no indication of consolidating the decrease in domestic inflation.The only realistic monetary policy alternative, according to bankers of Chile Central Bank who participated in the May 12 decision, was to maintain rates at their nearly two-decade high of 11.25%.
They noted that the risks posed by scenarios including stronger inflationary pressures were “particularly complex and expensive.”In the document published on Monday, they wrote that the Board reached an agreement that the fact that total inflation fell and activity and consumption continued to adjust did not indicate the resolution of the inflationary problem. They further stated that they still needed to accumulate information to assess whether the convergence of inflation to the 3% target had been consolidated.
Policymakers Sticking to Cautious Stance
Policymakers are sticking to their cautious stance on rates as both headline inflation and closely-watched core gauges continue to run well above the 3% target. Still, investors expect easing to start in coming months on bets that activity and price pressures are cooling. The monetary authority’s decision to raise capital requirements last week also fanned speculation borrowing cost cuts are near.
Annual inflation slid back into single digits for the first time in 13 months in April, according to the national statistics institute. However, consumer prices excluding volatile items increased 10.3%.
Chile’s gross domestic product grew 0.8% in the first quarter from the prior three-month period, below the 1% forecast by analysts in a Bloomberg survey. Activity rose on the back of services such as hospitality and restaurants, while mining weighed on results. In the minutes, board members wrote that economic readings were in line with their forecasts. They wrote that this was good news, especially after several quarters in which this had not been the trend.