The Central Bank of Chile surprised the market by unanimously deciding on Wednesday to raise the benchmark interest rate al 5.5%, as part of an accelerated withdrawal of the monetary stimulus to face inflationary pressures.
The strong increase in the Monetary Policy Rate (TPM), which began in July of last year, took it to 4% in December.
“The Board’s decision is consistent with a monetary policy trajectory that, in the short term, would be around the upper edge of the rate corridor considered in the last IPoM (Monetary Policy Report),” the Bank said.
“The risks for the evolution of inflation continue to be significant and its eventual realization becomes especially relevant in a context in which both the annual variation of the CPI and its prospects are already high,” he added.
While market operators had estimated that the MPR would rise to 5.25% this meeting, analysts had expected it to reach 5 percent.
The bank highlighted that annualized inflation has continued to advance in recent months and reached 7.2% in December.
The local economy has been favored by the aid to households granted by the government to counteract the impact of the coronavirus pandemic, as well as by partial withdrawals of savings in pension funds.
The board meeting did not have its five members as the body’s president, Mario Marcel, submitted his resignation days ago to take over as finance minister in the future government of leftist Gabriel Boric starting in March.
The government hopes to nominate a new president in the coming days to replace Marcel, in addition to filling his vacant position on the board.