Chile, Peru Hold on Interest Rates

The Chilean central bank has left its 6.25% benchmark rate unchanged, as spending growth remains high but private consumption spending is starting to decelerate. “Higher international oil and agricultural commodity prices and the recent 9% weakening of the CLP could pressure inflation readings over the next few months and put added pressure on the central bank to take ownership of the challenging inflation dynamics,” Goldman Sachs says. Inflation outlook is still extremely challenging, according to the shop, as non-tradable inflation accelerated to a high 10.8% yoy in April and core to 8.1%. “However, at this stage the central bank is still resisting hiking the policy rate from the current neutral 6.25%, as it shows concern, perhaps excessive, with the sluggish pace of activity and the level of the CLP,” GS adds. Peru’s central bank meanwhile kept the benchmark rate at 5.5%. The bank said it will continue its efforts to maintain low inflation, as Peru currently experiences high food prices.