SANTIAGO: Chile’s central bank held the benchmark interest rate at 3.0 percent on Thursday, as widely expected, and highlighted that it was carefully monitoring inflation, which has repeatedly come in higher than market forecasts over the last year.
The bank cut the rate 200 basis points between October 2013 and October 2014 to stimulate a flagging economy in the top copper exporter, but has since paused to allow inflation to cool.
The most recent inflation reading in January came in well above market expectations, as the effect of a lower oil price was wiped out by retailers passing on the costs of higher import prices and taxes to consumers.
“January’s inflation was unexpectedly high, primarily the core measure,” the bank said in its release on Thursday. That underlines that it is looking closely at core inflation, which strips out more volatile food and fuel costs and rose 0.6 percent in January.
The bank said it expected annual inflation to remain above its 2 to 4 percent tolerance target for some months, a phrase it used regularly in the second half of last year but omitted at its last meeting in January.
It maintained its neutral bias. Most analysts do not expect the bank to return to its easing cycle until at least the second quarter of 2015.