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SANTIAGO, Aug.31 (Reuters) – Chile’s central bank said on Tuesday it would raise its benchmark interest rate to 1.5% from 0.75%, as a rapid COVID-19 vaccination program helps the world’s first copper producer to resume economic activity and inflation is rising.
The bank started withdrawing its monetary stimulus last month, raising the rate to 0.75% after a long period of holding at 0.5%, its lowest point since the start of the pandemic and associated lockdowns .
The bank’s board said in a statement that it had taken a unanimous decision to double the interest rate out of concern “to avoid the build-up of macroeconomic imbalances that could lead to a more persistent rise in inflation.”
Externally, he pointed to a sustained global economic recovery and said his move was in line with the actions of several other central banks in emerging economies in response to rising inflation.
In Chile, the bank said, financial market volatility has persisted due to the additional potential for further withdrawals by Chileans from their private pension savings, which central bank chief Mario Marcel says could fuel the economy. inflation and overheating the economy.
In July, consumer prices in Chile rose 0.8% and year-over-year inflation hit 4.5%, the highest level since March 2016, surprising traders who had forecast that the inflation would only increase by 0.3% last month.
The rise in prices was driven by increases in transportation costs and especially gasoline, said the Chilean statistical agency, INE, although the prices of food and non-alcoholic drinks have also risen sharply.
Reporting by Aislinn Laing; Editing by Chris Reese and Peter Cooney
Our Standards: The Thomson Reuters Trust Principles.
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