Chile, Peru Ease to New Lows

Chile and Peru have both continued with monetary easing, in line with expectations. Chile’s central bank has cut its monetary policy rate by 25bp to 0.50% and says it may stay at this level for a “prolonged period.” It aims to lower inflation to a target rate of 3.0% from 3.6% currently. The easing is in line with what Celfin Capital and Barclays expected. Barclays predicts this will be the last easing, saying that further reductions may create distortions. The consensus expects the rate to be increased to 1.5% by May 2010. Peru meanwhile cut by 100bp to 2.0%, more than the 50bp reduction that had been expected, following a fall in inflation.