SANTIAGO (HPD) — The Central Bank of Chile raised the reference interest rate on Wednesday from 10.75% to 11.25% in a new attempt to stop the escalation of inflation that in 12 months led to the rise in the cost of living to 13.7%.
The decision to raise the Monetary Policy Rate was unanimous among the advisors of the Central Bank, who in a statement anticipated that the cycle of rate hikes that began in July 2021 has “reached the maximum level.”
The note adds that the rate will remain at that value “for as long as necessary” to ensure a fall in inflation.
The objective of the issuing institute is to curb inflation, which in 2021 closed at 7.2%, the highest in 14 years. So far this year, it accumulates 10.8%, far from the 3% annual goal of the Central Bank, which estimates that it will take two years to reach its objective.
The statement points out that global growth prospects and international financial conditions have deteriorated and inflation continues to show signs of persistence, and “the national financial market has adapted to recent global trends.”
The inflationary escalation in Chile has been dragging on since last year, when Chileans withdrew just over 50,000 million dollars from their pension funds, to which another 35,000 million dollars were added for state subsidies for the pandemic. The foregoing unleashed a wave of consumerism. Added to this is the international rise in prices after the Russian invasion of Ukraine.
The Chilean economy is experiencing a slowdown process and according to the Minister of Finance, Mario Marcel, the South American country would grow around 2.2% this year, far from the 11.7% of the Gross Domestic Product (GDP) of 2021.
The International Monetary Fund in its most recent report “World Economic Outlook” indicates that Chile would grow around 2.0% this year and contract by 1% in 2023, registering the worst performance in the region, which as a whole would grow 3.5%.