Chile economists expect the central bank to cut its key interest rate by 75 basis points for the second straight meeting in October as inflation slows toward target and demand shows signs of stabilizing.
(Bloomberg) — Chile economists expect the central bank to cut its key interest rate by 75 basis points for the second straight meeting in October as inflation slows toward target and demand shows signs of stabilizing.
Policymakers will reduce borrowing costs to 8.75% next month and to 5% in about a year, according to a monthly central bank survey of economists published on Tuesday.
Annual inflation will end 2023 at 4%, below the prior estimate of 4.1%.
Chile central bankers led by Rosanna Costa are counterbalancing an inflation slowdown and a weak economy against the emergence of renewed pressure on prices.
Policymakers lowered borrowing costs by 75 basis points to 9.5% on Sept. 5. Still, the peso hit a fresh year-to-date low last week, a move that threatens to make key imports such as fuels more expensive.
Read more: World’s Biggest Rate Cuts Coming After Chile Tamed Inflation
Annual inflation slowed to 5.3% in August, much lower than forecast, while a closely-watched price gauge that excludes volatile items was 7.4% in 12 months.
By comparison, Chile targets cost-of-living increases at 3%.
In an interview with newspaper Diario Financiero, Costa said part of the positive surprise from August’s inflation reading may be reversed in coming months.
Chile’s peso has weakened beyond levels considered in the central bank’s latest quarterly monetary policy report, she added.
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