In its statement, the issuing institution issued its message that the withdrawal of monetary stimuli would be done "gradually and cautiously".
After the end of December, the Central Bank Council decided to continue the process of withdrawing the monetary stimulus rate by 25 basis points by raising its monetary policy (MPR), remaining at 3.0%.
This process, which began in October, is part of the economic recovery that took place at the local level in 2018, after GDP growth was almost 4%.
In the September report on monetary policy (the Monetary Policy Report), the publishing institute has already indicated that economic dynamism has become necessary to raise the rate to a neutral level – between 4% and 4.5%. but the most optimistic tone of the Council, which focused on removing capacity gaps, did not create a consensus on the market, a difference that has not yet been resolved, because this factor is not observable and depends on the estimate of the growth potential of the economy.
In recent months, the debate has focused on the trajectory tracked by the TPM, considering the wind against the international scenario, where the fears of the trade war, the cooling of the economy in China, and other policy factors could mean lower growth in the Chilean economy.
This means that the majority of the market expects the decisive rate to reach 3.5% by the end of 2019, although some players such as Itau have raised the bet to 3.75%.
Continuity and caution
In its press release published this afternoon, the autonomous entity mentioned that "macroeconomic conditions continue to justify a gradual reduction in currency motives in line with the provisions of the latest monetary policy report."
At the same time, they reminded that the process would be "progressively and carefully", keeping the tone set at the December Council of the Monetary Policy Council (RMP).
Moreover, he announced that another IPOM "pays special attention to the development of the international scenario and its consequences for the convergence of inflation with the goal".
The decision was taken before the unanimous Council members, consisting of Alberto Naudon, Rosanna Costa, Pablo García, alongside Vice President Joaquín Viall and President Mario Marcello.
Quarter quarter gains momentum
In its statement, the Council draws attention to the fact that in the last quarter of the year "the economy returned to dynamism, in line with what was said in the December report on monetary policy," and noted that the activity of minerals tends to accelerate, with investments ".
In this context, he emphasized "the dynamics of capital goods imports, the revision of CBC land records and the persistence of positive numbers for construction".
With regard to prices, the statement highlights that the lowest headline inflation rate in 2018, which reached 2.6% below the 3% target, was "mainly affected by the fall in prices of more volatile components (energy and food)."
In the meantime, he noted that "prices that are most vulnerable to gaps in activity such as IPCSAE's unregulated services have continued to grow" and stressed that although "inflation expectations until December 2019 have been reduced to 2.8%", the two-year horizon remain anchored at 3%.
Moderating global growth
Concerning the external front, the statement states that "recent data point to a slowdown in world economic growth more than anticipated, along with volatility in financial markets, and the political and economic risks that persist."
In this context, he points out that "economic expectations have worsened" both in the developed and emerging world, where China's case has triggered "notifying new authorities".
The contrast is marked by the United States, where the last data "remains dynamic".
This, according to them, led central banks to point out "a higher degree of normalization of their monetary policy that has been incorporated into market prices".