Chile's central bank keeps benchmark interest rate at 11.25%

BY Reuters | ECONOMIC | 01/26/23 04:42 PM EST

SANTIAGO, Jan 26 (Reuters) - Chile's central bank maintained its benchmark interest rate at 11.25% on Thursday, as expected, in a unanimous decision by its governing board, with the bank saying inflation remains high and related risks persist.

The central bank embarked on an aggressive monetary policy tightening cycle in July 2021 to reign in spiraling inflation and has increased the rate by a 1,075 basis points since then to its current level.

The rate has remained at 11.25% since October.

The Andean nation has been struggling to tame inflation, and finished 2022 with an annual inflation rate of 12.8%, the highest level since 1991.

Still, inflation has shown signs of slowing down with December registering a 0.3% rise in prices compared to 1.0% from the previous month.

"Monetary policy has made a significant adjustment and is facilitating the resolution of the imbalances present in the economy. However, inflation remains very high and its convergence to the 3% target is still subject to risks," the bank said in a statement.

The bank's board "will keep the monetary policy rate at 11.25% until the state of the macroeconomy indicates that this process has been consolidated," the bank said, adding that two-year inflation expectations remain above 3%.

The report said that there is greater market optimism globally following China's easing of zero-COVID policies, less restrictive monetary policy from the U.S. Federal Reserve and a rise in copper prices.

Chile's peso has also appreciated around 8% according to the central bank and the "macroeconomic implications of the recent appreciation of the peso will be assessed in the next Monetary Policy Report." (Reporting by Natalia Ramos and Carolina Pulice; Writing by Anthony Esposito; Editing by Diane Craft and Grant McCool)

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