Consensus on Chile’s Interest Rate Keep

The board of the central bank of Chile is expected keep the benchmark interest rate of 6.25% unchanged at Thursday’s policy meeting, according to Merrill Lynch. At its last policy meeting, Chile held rated and removed its tightening bias. “The board’s decision to remove the tightening bias at the last meeting signaled less concern with the inflation scenario ahead,” Merrill says. However, Chilean consumer prices rose 0.4% month-on-month in April, the top of market expectations, while core and non-tradable inflation was high and continues to accelerate on a year-on-year basis, says Goldman Sachs. “Particularly worrisome is the fact that core and non-tradable inflation continue to accelerate,” says Goldman. “If the inflation picture does not improve visibly over the next 2-3 months we do not rule out that the central bank could, despite the neutral bias, hike rates in order to aid in the inflation convergence process. However, for the time being we expect the central bank to remain on hold,” Goldman adds.