Chile Central Bank Member Was Open to Weighing October Rate Cut

9lx1)0h56g()d)1s1jkr9mk5_media_dl_1.png Chile central bank, Bloomberg

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(Bloomberg) — Chile’s central bank said one board member was open to discussing a borrowing cost cut in October even as policymakers agreed there were continued inflation risks, according to the minutes to its last policy meeting.

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Lingering threats to the consumer price outlook warranted gathering more information before advancing with monetary easing, central bankers wrote in the minutes to its Oct. 28 decision, when they held borrowing costs steady at 4.75% for the second meeting. Important incoming data will encompass inflation and third-quarter economic growth, policymakers wrote.

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While policymakers agreed that the only “plausible” option at the meeting was to hold rates steady, “one Board member noted that several factors pointed to a reduction in inflation risks, so the option of lowering the rate by 25 basis points could have been discussed, even though it would have ruled it out,” they wrote in the document published Thursday.

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Chile central bankers led by Rosanna Costa are sticking to their cautious stance as consumer price rises run above the 3% target and the country gears up for presidential elections. Board members recently got respite from data that showed annual inflation in October unexpectedly slowed to the lowest level since April 2021. Economists expect policymakers to cut borrowing costs by a quarter-point to 4.5% at next month’s rate decision.

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Consumer prices rose 3.4% in October from the year prior, below all estimates in a Bloomberg survey of analysts that had a 3.7% median forecast. Monthly inflation was flat, and a closely-watched gauge of prices without volatile items like food and energy fell 0.1% from September.

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In the minutes, one board member said that core inflation was still high and that consumer price pressures had not disappeared. Another policymaker said that, as long as data continued to come in-line with central bank forecasts, the key rate “should continue to be reduced toward a value compatible with the upper half of the range of values for the neutral monetary policy rate.”

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Policymakers have estimated the neutral rate at 3.5% to 4.5%. 

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Chile’s first round of presidential elections will take place Nov. 16, followed by a runoff on Dec. 14. Obligatory voting rules will lead to millions more ballots being cast than in previous contests, adding uncertainty to the outcome.

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—With assistance from Robert Jameson.

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