Chile Slashes Rates Another 250bp

Chile’s central bank has once again taken an axe to its monetary policy rate, chopping off 250bp, more than the 175bp several shops had expected. The move brings the rate down to 2.25%. “The decision is based on a significant fall in inflation,” the central bank says, adding that it is committed to make inflation drop to 3.0%, from 5.5% in February. UBS Pactual expected a 175bp cut, but said the easing could end up being “250bp or even 300bp.” Credit Suisse had initially expected 100bp, but later revised its forecast to 175bp. Celfin predicted a 175bp reduction and expects further easing through 2009 as inflation trends down from a 9.9% peak in October. JPMorgan, which had anticipated a cut of 200bp-250bp, says the policy rate could fall to 1.0% by mid-year.