Chile to Raise Interest Rate to Decade High

Chile’s central bank plans to raise its benchmark interest rate to 5.25%, a level not seen in a decade. Analysts expect this to come in the form of a third consecutive interest rate hike of 125 basis points.

With all eyes on the US Fed and the monetary policy decisions of other major economies, smaller countries are quietly making their own moves to fight inflation.

Borrowing costs in Chile will rise to their highest since 2012 after the latest interest hike. However, the central bank was left with no choice but to intervene after red-hot consumer prices drove inflation further above target.

Chile’s central bank is aggressively boosting rates to combat inflation, spurred by skyrocketing consumer prices that have risen more than projected for six consecutive months. 

The South American country’s economy grew by 12% last year, and analysts are concerned that inflation, currently 7%, could endanger growth if it goes much higher. 

What does this mean for me?

Chile and a raft of second-tier economies operate out of the limelight of breaking global news, but they must still tackle their economic challenges with the same set of tools.

By increasing interest rates, Chile expects inflation to cool, which will bring down consumer prices and keep consumers spending within their means. 

As a FOREX trader, you should watch these events closely so you can make better informed decisions about your minor-currency portfolio.