By 2 Min ReadFILE PHOTO: On March 16, 2021, a security guard stands outside the Chilean Central Bank building in downtown Santiago, Chile. Ivan Alvarado/Reuters SANTIAGO, Argentina (Reuters) – Chile’s central bank increased its benchmark interest rate to 0.75 percent on Wednesday, up from 0.5 percent the day before, as a quick COVID-19 immunization program aids the world’s top copper producer in resuming economic activity. Until late March, when it warned of a “severe” economic recession as a result of the virus, the bank had maintained its interest rate constant after several decreases. “Monetary policy will continue to accompany the recovery of the economy in a setting of gradual normalization,” the bank said in a statement. The rate hike shows a more hawkish stance to monetary policy in Latin America, which market experts expect to see as inflation progressively rises. The central banks of Brazil and Mexico, the region’s two largest economies, raised their benchmark interest rates in the last month, indicating that policymakers are paying more attention to inflationary risks in a region where countries like Brazil struggled with hyperinflation for years and others, like Argentina, are still dealing with double-digit annual price increases. In recent weeks, analysts and traders polled by Chile’s central bank agreed that the rate would climb as inflation rose, but they disagreed on when, with analysts predicting it would rise to 0.75 percent by August and traders predicting it would jump by 25 points as soon as this month. Analysts predicted 0.3 percent inflation in July, rising to 3.3 percent in 11 months, the higher end of the bank’s 2-4 percent objective, while traders predicted 0.3 percent inflation in July, rising to 3.4 percent in 12 months. Fabian Cambero contributed reporting, Hugh Bronstein wrote the story, and Richard Pullin edited it./n
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