The Chilean peso weakened today against the US dollar even after Chile’s central bank left its main interest rates unchanged as positive domestic fundamentals outweighed negative influence of the global economic slowdown.
The Central Bank of Chile maintained its main interest rate at 5 percent. It was not completely unexpected as the central bank was doing so for 10 consecutive months, but it was still encouraging as nowadays it is common to lower rates as a measure to battle economic slowdown. Indeed, the bank mentioned problems of the global economy:
Internationally, uncertainty persists about the fiscal and financial situation in the Eurozone, as does the risk of a sharp fiscal adjustment in the United States. Global financial conditions are somewhat tighter than they were a month ago and the dollar has appreciated in international markets.
Yet domestic growth allowed Chile’s central bank to refrain from an interest rate cut. Inflation rose to 2.9 percent in October, beating analysts’ expectation. The bank talked about both good and bad factors in the domestic economy:
Domestically, output and demand indicators have evolved above projections. The labor market remains tight.
The favorable monetary policy did not help the Chilean currency, though.
USD/CLP rose from 480.2500 to 484.5500 as of 23:45 GMT today. EUR/USD was flat at 615.5550.
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