(Bloomberg) – The Central Bank of Chile interrupted its cycle of interest rate drops and left all options on the table for future borrowing costs adjustments, citing increased uncertainty as well as risk of inflation servants and global.
Most of Bloomberg
Political decision -makers led by Rosanna Costa voted unanimously to maintain borrowing costs 5% late on Tuesday, as planned by all analysts in a Bloomberg survey. In a declaration that accompanies him, the members of the board of directors wrote that a lower peso, higher labor costs and an increase in electricity prices stimulate the dynamics of inflation .
“The risks of inflation have increased, which strengthens the need for caution,” they wrote.
While the declaration published following the previous rate decision in December increased the prospect of rate reductions “in the coming quarters”, the press release today was more open, saying that “the board of directors will assess the future movements of the monetary policy rate by considering the evolution of the macroeconomic scenario and its implications for the convergence of inflation. »»
Central bankers in Chile become more cautious when they make a short -term shock towards inflation which prevented it from slowing down to the 3%target. Salaries and electricity costs are increasing, while the Peso has reached its lowest level since mid-2022, which makes imports more expensive. Meanwhile, economic activity is slowly refreshing.
“They point out that the risks of inflation have increased,” said Florencia Ricci, head of the economy and markets of Banchile Inversiones. “In addition, they eliminate the expression which indicates that the rate of monetary policy will follow a decrease trajectory, thus avoiding giving signs on future movements.”
One -year -old exchange rates increased up to 13.7 base points on Wednesday following the management of the central bank and the bellicist declaration.
Chile’s decision one day came before the federal reserve could interrupt its own softening cycle. This decision, coupled with US President Donald Trump’s plans for commercial prices and lower taxes, predicts a stronger dollar in the world.
Increased rate
In their declaration, the central bankers of Chile warned against great unpredictability in the world economy. “In this context, the global financial markets have been very volatile in recent weeks in the midst of the change of government in the United States and developments in other sources of uncertainty in progress,” they wrote.