Central Bank considered a larger monetary adjustment during July meeting

SANTIAGO.- According to the Meeting Minutes revealed today, council members of the Central Bank of Chile reportedly considered raising the interest rate by 75 base points during a meeting held on July 10th, but opted to increase it by only 50 points as a signal to the market that there would be one or more additional hikes.

At the meeting, the councilors decided that an increase of half a percentage point in the Monetary Policy Rate (MPR), which was indeed implemented to bring the figure to 7.25%, would not surprise the market, which had been expecting the measure, and would allow them to indicate a rising tendency in their message.

“The Council estimated, however, that an increase of 25 base points would be insufficient given the deteriorating inflationary circumstances. For that reason, it was considered that the most plausible option may be to increase the Monetary Policy Rate by 50 or 75 base points” stated the Minutes.

Last year, Chile reported an inflation rate of 7.8%, which was the highest figure registered in 12 years.  Meanwhile, July of this year was marked by a 1.1% rise in inflation, bringing inflation over the last 12 months to 9.5%, an amount much higher than the official goal.