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SANTIAGO (Reuters) – Chile’s central bank maintained its benchmark interest rate at 11.25% on Tuesday, as the bank said the country had reached its peak in the current hiking cycle, which began in July 2021.
The decision to maintain the rate was unanimous, the central bank noted and was expected by analysts and traders as the world’s top copper producing nation struggles to rein in inflation.
In a statement, the central bank said that monetary policy has made a “significant adjustment” and is helping imbalances in the economy.
“However, inflation continues to be very high and convergence to the 3% target is still subject to risks,” the statement said.
“The Council will maintain the MPR at 11.25% until the state of the macroeconomy indicates that said process has been consolidated.”
In October, the agency stated that the MPR had reached the “maximum level” of the cycle and would remain at that level until it hit its target inflation rate.
The bank made a series of aggressive rate hikes in an attempt to contain runaway inflation caused by a rapid economic recovery from COVID-19 and Russia’s invasion of Ukraine.
There have been sign that inflation is receding in Chile, with 12-month inflation dropping to 12.8% in October from 14.1% in August. October’s monthly inflation of 0.5% was below market expectations and the lowest in eight months.
Despite this, 12-month inflation is still far above the central bank’s target of 2% to 4%.
On Wednesday, the central bank will publish updated macroeconomic projections for 2022 and 2023.