[11th Reuters]-President of the Chilean Central Bank, Marcel, said in an interview with Reuters on May 11 that the central bank may head for the third rate cut this year within six months. He stressed that there is a long way to go.
Chile, the world's largest copper-producing country, has been affected by the US-China trade dispute and suffered the worst drought in the past 60 years. The government is exploring the possibility of fiscal stimulus. The central bank also cut interest rates in June and September, and the policy rate is 2%, the lowest level in nine years.
“I am particularly worried about the impact of global tensions on trade, financial markets and business prospects, such as the US-China trade dispute and the UK's withdrawal from the European Union,” said the president. “The central bank will prepare some additional monetary easing measures if demand, such as consumption and investment, is slower than expected.”
In the future, the central bank will closely monitor core inflation data, especially the inflation of services that are sensitive to economic trends.
The schedule of the central bank's policy decision meeting within the year is the end of October, and the next is December 10, which is the last day of the year. The December meeting will publish a quarterly monetary policy report that includes the economic outlook. .
The president indicated that the next policy decision is not necessarily about the timing of the new economic outlook, but rather how much the short-term outlook is backed by economic indicators.
The central bank of Chile has lowered its growth rate forecast this year from 2.75-3.5% to 2.25-2.75% in a monetary policy report released in September.
The president pointed out that key economic indicators such as the consumer price index and the unemployment rate have been "almost" in line with expectations since the last meeting in early September. “The situation hasn't deteriorated, but there has been no improvement over expectations. However, it is still too early to make a decision, and we are seeing the situation.”
With regard to the fact that the economy fell due to the sudden drop in currency in neighboring Argentina and capital regulations were introduced, the impact on Chile was “very little, if any,” and the two countries have a considerable trade and financial relationship It was limited.
The European Central Bank (ECB) and others are expected to move deeper into negative interest rates soon, and US President Trump has called on the US Federal Reserve (FRB) to introduce negative interest rates. But President Marcel stressed that in Chile these policies are completely out of sight.
On top of that, he said, “We are considering the quantitative monetary easing as soon as possible. The central bank of Chile still has room for interest rates.”