The Andean nation last month reduced its key rate by 100 basis points to 7.25%, with the monetary authority seeing inflation pressures easing. The cut, in line with estimates, was not a unanimous decision.
However, the board members agreed that a larger cut “could be a big surprise that might generate unnecessary volatility,” the statement added.
One member said that a cut of 125 bps points or more was, in his view, “the best response to the macro scenario and reduced risks of inflation being lower than desired”.
The board members agreed that inflation was converging to the 3% target at a faster rate than had been expected some time ago.
Economic activity in Chile is “on track with the forecasts made in December”, even though temporary disruptions in sectors such as fishing, mining, and manufacturing have been observed, the statement added.
Despite the split vote, all members agreed that the proper implementation of monetary policy implied meeting the inflation target in an efficient manner, at the lowest possible cost in terms of activity.
A poll of analysts released by the monetary authority on Monday showed the central bank is expected to lower the benchmark interest rate by another 100 basis points to 6.25% at its next meeting in April.
Source: Economy - investing.com
