In his statement, the issuing institute reiterated his message that the withdrawal of the monetary stimulus will be implemented "with gradual and caution."
After a break in December, the Central Bank Board decided to resume the monetary stimulus withdrawal process by increasing the MPR rate by 25 basis points, leaving it to 3.0%.
The process, launched in October, is part of the economic recovery that took place at the local level in 2018, after reaching a GDP expansion of close to 4%.
The diagnosis that the dynamics of the economy began to be necessary to increase the neutral rate – between 4% and 4.5% – has already been proposed by the issuing institute in September of the Monetary Policy Report (Monetary Policy Report). the past, but the most optimistic tone of the Council, which was designed to close deficiencies in capacity, did not generate market consensus, a discrepancy that has not yet been resolved because this factor can not be noticed and depends on the assessment of the growth potential of the economy.
In recent months, the debate focused on the trajectory followed by TPM, taking into account the winds against the international scenario, where concerns about a commercial war, the cooling of the economy in China and other political factors could mean lower growth for the economy of Chile.
The majority of the market expects the ruling rate to close in 2019 with 3.5%, although some entities such as Itau have raised the pledge to 3.75%.
Gradual and caution
In its press release, published this afternoon, the autonomous entity has alluded that "the macroeconomic conditions continue to justify the gradual reduction of the monetary stimulus, in line with the provisions of the latest monetary policy report."
At the same time, they reminded that the process will be implemented "with gradual and cautious", which will hold the tone that is being introduced at the December monetary policy meeting (RMP).
In addition, he announced that the next IPM will "pay special attention to the evolution of the international scenario and its implications for bringing inflation closer to the goal."
The decision was adopted before the unanimity of the members of the Council, composed of Alberto Naudon, Rosana Costa, Pablo Garcia, besides Vice President Joaquín Vial and President Mario Marcel.
Four quarters returns the dynamics
In its statement, the Council alludes to the fact that during the last quarter of the year "the economy returned to dynamism, in line with that envisaged in the December Monetary Policy Report", noting that the activity of non-mining objects "tends to accelerate , especially in the investment-related branches. "
He emphasized "the dynamics of the import of capital goods, the upgrading of the CBG cadastre and the persistence of the positive figures for construction".
As for prices, the statement stresses that the lowest accumulated inflation growth in 2018, which closed to 2.6% – below the 3% target – "was mainly affected by the fall in the prices of components more volatile (energy and food). "
Meanwhile, he noted that "prices most vulnerable to the gap in activities, such as IPCSAE's unregulated services, continued to grow gradually" and stressed that while "inflation expectations by December 2019 are reduced to 2.8%", for the two-year horizon , they remain anchored at 3%.
Moderate global growth
Regarding the external front, the statement confirms that "recent data point to moderation in the growth of the world economy higher than expected, followed by the volatility of financial markets and the political and economic risks that continue."
In this, he points out that "economic expectations have deteriorated" in both the developed and the new world, where the case with China has prompted "the release of new stimuli by their authorities."
The contrast is marked by the United States, where the latest data "remains dynamic".
This, they say, led the central banks to point out "greater gradualization in the normalization of their monetary policy, which is built into market prices."