(Bloomberg) – The Central Bank in Chile stopped the reductions of interest rates and left all options on the table for future borrowing cost adjustments, noting the increasing uncertainty as well as the risks of local and global inflation.
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Policymakers led by Rosana Costa unanimously voted to maintain borrowing costs by 5 % late on Tuesday, as expected by all analysts in Bloomberg Survey. In a accompanying statement, members of the Board of Directors wrote that the weaker bizo, the high costs of employment and an increase in the electricity tariff pays the dynamics of inflation.
“The risk of inflation has increased, which enhances the need to be careful,” they wrote.
While the statement published after the previous average decision in December raised the possibility of price discounts “in the upcoming seasons”, the statement today was more open, saying, “The Board of Directors will evaluate the future movements of the monetary policy rate by looking at the development of the macroeconomic scenario and its effects On the convergence of inflation.
Banker in Central Chile turns more cautious as they ride a tremor in the near term of inflation, which prevented him from slowing it towards a target of 3 %. Wages and electricity costs rise, while the bizo has reached its weakest level since mid -2012, making imports more expensive. At the same time, economic activity is slowly released.
“They point out that the risk of inflation has increased,” said Florence Richie, head of economy and markets in the mood coup. “In addition, they abolish the phrase that indicates that the rate of monetary policy will follow a landmark, and thus avoid giving signs about future movements.”
The exchange rates increased on one year to 13.7 basis points on Wednesday after the price of the Central Bank and the Falcons Statement.
Chile’s decision came a day before the Federal Reserve is expected to stop its mitigation cycle. This step, along with US President Donald Trump’s plans for commercial tariffs and tax reducing, beats the strongest dollar around the world.
The rate increases
In their statement, Central Banking warned of the inability to predict the global economy. They wrote: “In this context, global financial markets have been very volatile in recent weeks, amid the change of government in the United States and developments in other continuous sources of uncertainty.”
At the local level, the annual inflation accelerated to 4.5 % in December, and Costa warned that it would remain near 5 % in early 2025. In a statement on Tuesday, central bankers indicated that traders believe that prices are higher than the target within two years.
The cost of living costs explode even with the remaining local economic growth. In general, the available data indicates a better activity than expected in the fourth quarter. At the same time, both commercial banking and the labor market are still weak.
Analysts surveyed by the Central Bank of Chile expect that GDP will expand by 2.1 % in 2025. Recently, the economic activity for the second month in a row was designed in November with the acquisition of industry and trade.
Felipe Klein, an economist at BNP Paribas, said that the central bank’s statement leaves the door open to a more honest bias. He said that policy makers realize that it is not clear that long -term inflation expectations may be established.
He said: “With a surprise in inflation in the short term or the additional neglect of the exchange rate, the long -term inflation expectations can begin to rise.” “If this happens, it will not be strange for analysts to start evaluating not only the timing of the next decline, but also the possibility of increasing the rate of monetary policy.”
-With the help of Giovana Seravim.
(Updates with the transmission of the market in the seventh paragraph)
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