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Chile, Peru hold overnight rates steady on inflation

Bnamericas Published: Friday, August 12, 2016

The Chilean and Peruvian central bank boards decided on Thursday to hold their benchmark interest rates at 3.50% and 4.25%, respectively.

Chile has maintained its rate at the same level since last December, and Peru since last February.

PERU

Peru's central bankers said their decision was largely due to general inflation easing back into its target range of 1-3%.

The annual CPI slowed to 2.96% in July from 3.3% in June. Month-on-month, inflation rose 0.1% from June to July.

The rate decision statement said inflation looks to be further gradually declining, as prices for certain food items, public services and the currency exchange rate, which had recently seen upticks, were now settling lower again.

The central bank board sees inflation remaining in the higher end of the target range during the coming months and decreasing next year to 2% at the end of 2017.

Peru's outlook for economic growth in 2016 rose to 3.8% from 3.7% and expectations for GDP expansion in 2017 increased to 4.2% from 4.0%. However, some weakening in construction and manufacturing occurred in July due to lower investment.

CHILE

The Chilean central bank pointed out that inflation returned to the 2-4% target range in July and the two-year inflation expectations remain in line with the bank's 3% target.

The monthly CPI was 0.20% last month and 12-month inflation came in at 4.0%.

The board also noted that the economy remains weak, confidence indicators are pessimistic and the labor market is gradually deteriorating.

Chilean financial sector analysts and executives that participate in the central bank's monthly economic forecast survey cut this week their GDP growth projection to 1.6% from 1.7% in July, and for 2017 to 2.0% from 2.1%.

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