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Chilean Central Bank Plans More Interest Rate Cuts, Peso Weak

February 20, 2014 at 0:23 by Vladimir Vyun

10,000-peso bills fanThe Chilean peso ended yesterday’s trading session weak against the US dollar as the nation’s central bank cut interest rates and signaled about possibility of additional monetary stimulus. The currency rose a little versus the euro at the start of the current trading session.

The Central Bank of Chile cut its main interest rate by 25 basis points to 4.25 percent on February 18. The central bank spoke about robust economic recovery in developed nations, but was worried that growth of emerging markets is slowing. Regarding the domestic economy, the bank was rather pessimistic:

The Chilean economy has continued to lose strength. Domestic output and demand have grown less than assumed in the Monetary Policy Report, particularly in investment-related sectors.

As a result, the central bank not only lowered the monetary policy interest rate, but suggested that additional stimulus may be introduced in the near future:

The Board estimates that in the coming months it might be necessary to increase the monetary stimulus to ensure that projected inflation will stand at 3% in the policy horizon.

USD/CLP was up 0.87 percent to close at 552.55. EUR/CLP was down a bit from 760.5450 to 759.2150 as of 00:21 GMT today.

If you have any questions, comments or opinions regarding the Chilean Peso, feel free to post them using the commentary form below.

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