Chilean MPC says it will keep stimulus in place

The Central Bank of Chile’s monetary policy committee says it will maintain and, if necessary, expand its stimulus package to tackle the effects of Covid-19.

On July 15, the MPC unanimously decided to maintain interest rates at a record low of 0.5%. It will also keep to the rate of asset purchases it announced in previous policy meetings, buying $1.5 billion in assets over the next four weeks.

“The board reiterates that it will maintain a strong monetary impulse for a prolonged period of time, in order to ensure that its objectives are achieved,” says the policy statement. “In addition, in case the evolution of the economy so requires, it will continue to assess other options to intensify such impulse and provide support to financial stability, using unconventional instruments.”

The central bank estimated that in May the economy contracted by 15.3% year on year, with declines in every economic sector.

The central bank is also offering banks cheap liquidity in exchange for lending to small businesses. But the MPC’s policy statement still stresses that “the second quarter’s bank lending survey reflects tighter supply conditions for all credit categories”.

Headline inflation was recorded at 2.6% in June. The central bank’s target is 3% over a two-year period.