Chile Holds Rates

Chile’s central bank has held its interest rate again, in line with market expectations. The rate has been on hold since January 2012, when it lowered the benchmark by 25bp to its current 5.0% level. The bank cites ongoing uncertainty in Europe and also notes peso appreciation as other elements in the central bank’s considerations. Citi, in a note following the decision, highlighted the similarity of this month’s statement to last month’s, noting international market tensions easing but ongoing Eurozone questions. Citi suggests a hold for the next few months, but with an eye toward cutting versus raising when the time comes. “With the pressure on wages (and therefore non-tradable inflation) easing and the CLP strengthening further against the USD, we believe rate cuts remain a possibility. However, for this to materialize, further evidence that the pace of activity is moderating needs to take place,” the shop says.