SANTIAGO – Chile’s central bank raised its benchmark interest rate to 9.75% on Wednesday, from 9.0% previously, and said it expected more rate hikes would be necessary as it looks to rein in spiraling inflation.
The hike of 75 basis points was approved by all of the central bank’s board members. This continues an accelerated hike in Chile’s Monetary Policy Rate (MPR) that started last year and reached 9.0% in June.
In a statement, the bank said “increased internal uncertainty” had led to a strong depreciation of the peso.
“In the short term, these developments provoke an additional hike in domestic prices, in a context where inflation and its persistence are already elevated,” it said.
“The board expects that new MPR hikes will be necessary to ensure convergence of inflation to 3% over two years.”
The hike exceeded operator and analyst polls, which had predicted an MPR of 9.5% in July.
(Reporting by Fabian Cambero, Natalia Ramos and Carolina Pulice, Editing by Rosalba O’Brien)