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Central Bank Policy

In addition, the expectation of the market of new rate cuts would negatively affect the value of the Chilean peso. The weakness mentioned in policy transmission channels monetary jointly with the backlog which has its actions to affect the real economy, make that you wait a minimum result in the short term for the decision to cut the rate. The improvement in the economic prospects of Chile, then in the immediate term, remains in the hands of what can be achieved with the package economic stimulus. The scenario that appears more probable in the Chilean economy is that the effects of fiscal policy (and some monetary policy) about the economic recovery begin to be observed towards mid-year. Additional information at mayo clinic supports this article. Until getting to the reversal in the economic slowdown, should work to maintain exchange rate stability (up to may need to intervene the Central Bank as it had done last year to prevent the continuity in the appreciation of the peso) and manage the expectations of the market avoiding the same generating destabilizing behavior.

By the side of the Central Bank, before continue cutting its benchmark interest rate, the more effective option will be working on achieving the banking system to generate funding. The strengthening of channels of transmission of monetary policy and no new cuts, is the key to help the economic recovery. The Chilean economy has to overcome these months while maintaining the stability of the key economic variables. t Program. After that, Chile can begin to recover, at least in part, its pace of economic growth without major difficulties.

Monetary Authority

Editor’s Note: Chile is in inflation levels could not remember 12 years. Almost three times the goal of its Central Bank. Its growth is low. This reality did not escape the world, today. Bachelet has announced new measures, like international peers, to try to reverse this dynamic.

They can send me your comments to: Bachelet sum concerns the second part of its mandate Buenos Aires, Argentina on March 6, 2008 more inflation, less growth and energy problems. What else can happen to Michelle Bachelet in the beginning of this year? Inflation in Chile to reach an interannual level of 8.1% for the month of February, is not one minor fact. Only the memorious may remember a so high level of inflation in Chile: the last time that was a rate of inflation on top of 8.1 per cent was in June 1996. This is too much for a Central Bank with a target of 3% inflation (and with a range of 1% tolerance). But higher inflation is not the only problem that He is facing Chile. The Chilean brothers also come with concern how the level of activity slows. In a communique issued by the Central Bank: according to preliminary information, the January inflation increased 3.4 per cent compared with the same month the previous year.

This value is lower than expected and that have affected the fall in value added of electricity generation and mining activity. So far, dear (or expected) levels, by the banco Central de Chile are far from observed values: the Monetary Authority estimated a growth product for 2008 in a range of 4.5% to 5.5%, while its inflation target is located at 3% will be to sharpen the pencil? Less growth and more inflation. What you will do the Central Bank of Chile in the next meeting? The dilemma is more complex than it seems at first glance because of this decision should be considered also to where the Fed will move because higher rate differentials with the Fed, they can hinder the competitiveness of the Chilean economy through greater appreciation of the exchange rate.