Chile Keeps Rates on Hold

As expected, Chile’s central bank monetary policy committee kept its key policy rate unchanged at 5.75%, in line with forecasts and the broad market consensus. The tone of the press release was relatively neutral and the committee noted a tougher external market. “While the relevant external backdrop for the Chilean economy remains positive the risk of adverse external scenarios increased,” says Goldman Sachs. It adds that the central bank might have at some point to resume the rate hiking cycle in order to protect the 2008 inflation target. The peso should remain well anchored by the widening domestic-foreign interest rate differential, it adds.