Interest Rate Remains Unchanged in Chile due to European crisis
The Central Bank of Chile has announced that it will keep interest rates at 5% for the fourth consecutive month.
This comes at a time when Chile recorded 5.2 per cent growth in March compared to last year, a figure higher than expected. The labor market also remains tight.
However the Central bank has decided to remain prudent due to fears over repercussions for Chile during a volatile situation in Europe.
There is speculation that Greece will exit the European common currency, the Euro. The past week has seen growing fears by Greek citizens over the security of their savings; 90 million dollars were withdrawn from bank accounts in Greece this Wednesday.
In a press release the Central Bank explained that: “As the financial and fiscal situation in the Eurozone has deteriorated, uncertainty surrounding its resolution has increased. In global markets, volatility and risk aversion have increased.
In the past few months, economic indicators in the United States, China and other emerging economies have shown a weaker performance than anticipated by market consensus. International prices of primary materials, particularly oil and copper, have recorded a new decrease, although levels remain generally high”.
Copper is vital to the Chilean economy and accounts for over half of all its exports, of which the US and China are two major markets. The price is down 9.2 per cent in May and is set to be the biggest fall since September. This news came as Greece they failed to form a government.
The Central Bank has claimed that it expects inflation to remain on target, although there was a short term fluctuation due to the reduction of petrol prices. It is set to be in the upper limits of the 2 to 4 per cent target range for the first half of the year.
Regarding the interest rate, the Central Bank insisted it would remain flexible to change, and that future adjustments would remain subject to domestic and foreign economic conditions.