2023-11-14 16:10:00
He Central Bank of Chile highlighted in the minutes of last month’s monetary policy meeting the importance of the exchange rate in your inflation goalsfollowing the persistent weight weakness.
However, the monetary authority He reiterated that he will not seek a specific level for the currencyaccording to the minutes of the October 26 meeting, when the authorities unexpectedly slowed the pace of monetary easing with a rate cut from 50 basis points to 9%.
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While central bankers focus on inflation and the interest rates“it was reiterated that this did not mean that the exchange rate did not play an important role within the framework of inflation goals,” the bank said. The weight is “a relevant price in the economy, whose movements might have significant effects.”
The Council of the Chilean central bank, led by Rosanna Costaslowed the pace of monetary easing last month due, in part, to inflation risks derived from the costs of basic products and the fall of the peso. The currency hit a one-year low just before the October meeting, at which authorities also agreed to suspend a program to build up international reserves by purchasing dollars, which has contributed to the weakness of the peso.
However, increases in consumer prices They are regarding a third of what they were a year ago and the more persistent underlying indicators, which exclude volatile items, also show a downward trend. Both economists and operators They expect cost-of-living increases to return to the 3% target within two years.
“All the councilors agreed that the local activity and inflation scenario had few changes from what was planned, although the non-volatile component had fallen somewhat faster than projected,” the monetary policy makers wrote in the document published on Tuesday. “However, if the tightness of external financial conditions persiststhe medium-term effects for activity and inflation would be negative”.
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Annual inflation slowed to 5% last month, a reading slightly lower than expected. Still, Costa said authorities remain cautious as factors such as higher U.S. Treasury yields weigh on the peso, making key imports more expensive.
The authorities They considered a cut of 50 basis points and 75 basis points at the meeting, but they did not provide guidance on where they expect the rate to be at the end of the year. There was consensus that the December meeting would be the time to provide guidance on how the rate cut cycle would play out.
Among the large central banks of Latin America that have inflation targets, Brazil and Peru have also begun to make their monetary policy more flexible.
Translated by Paulina Steffens.
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