Chile’s Central Bank doubles benchmark borrowing cost to 1.5% amid sign of recovery

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Chile’s Central Bank doubles benchmark borrowing cost to 1.5% amid sign of recovery

Chile’s Central Bank had issued a statement late on Tuesday saying that it would hike its benchmark borrowing cost by 75 bps to 1.5 per cent, doubling up interest rates followed by a rapid acceleration in vaccination program that seemed to have helped the world’s largest copper producer restart economic activities and eventually spurring up inflation indicators that had prompted the Chilean Central Bank to herald a rate-hike.

Aside from that, latest move from the Central Bank of Chile, the resource-rich country spanning across Latin America’s western edge, followed a tapering of fiscal support for the economy last month, while the Central Bank also had raised its benchmark borrowing cost by 25 bps to 0.75 per cent after keeping the rate on hold at 0.5 per cent for an extended period, the lowest point since the onset of pandemic outbreak.

Meanwhile, adding that the Central Bank’s management board had decided unanimously to double up interest rates, it said in a statement, “The bank’s board double the interest rate out of a need to avoid the accumulation of macroeconomic imbalances that could cause a more persistent increase in inflation”.

Chile raises benchmark interest rate to 1.5 per cent

On top of that, Chile’s Central Bank, whose monetary policy had often been recommended by IMF (International Monetary Fund) for other natural resource-rich country’s like of Gulf nations, also had illustrated that it had begun to sense a sustained global recovery, while its latest act what has largely been in an alignment with a number of emerging market economies, came into being as a response to an uptick in inflation indicators.

Nevertheless, Chile’s inflation over past twelve months through July had hit 4.5 per cent last month, marking up the strongest level since March 2016, while Chile’s CPI (Consumer Price Index) jumped 0.8 per cent in July, wildly topping an analysts’ forecast of 0.3 per cent last month.