Chile’s central bank will kick off an aggressive monetary easing cycle this Friday with a key rate cut of 75 basis points as inflation slows toward target, a survey of financial traders showed.
(Bloomberg) — Chile’s central bank will kick off an aggressive monetary easing cycle this Friday with a key rate cut of 75 basis points as inflation slows toward target, a survey of financial traders showed.
Policymakers will lower borrowing costs to 10.50% at their July 28 decision and then to 7.75% by December, according to the central bank survey published on Tuesday. The poll also showed annual inflation easing to 3.20% in 12 months.
Chile is set to become the first major Latin American economy to relax monetary policy after raising borrowing costs to an over two-decade high amid a post-pandemic price surge. The nation’s cost of living fell on the month in June and activity is showing signs of cooling. Some investors bet the easing cycle could start with an even bigger reduction of 100 basis points.
Read more: Chile’s Prices Unexpectedly Fall, Paving Way for Rate Cut
The country’s economy expanded by a record 11.7% in 2021 as government cash transfers and billions of dollars in early pension withdrawals propelled consumption. By contrast, gross domestic product will tick up just 0.2% this year, according to finance ministry estimates published earlier in July.
Regionally, investors see Brazil starting off a monetary easing cycle in August, while Mexico is expected to follow suit by the end of the year.
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