Following a surprise rate cut in June, the Chilean central bank considered lowering borrowing costs for the second consecutive month in July, the minutes of the most recent monetary policy meeting showed.
Policymakers at Banco Central de Chile unanimously voted to lower its key rate by 50 basis points to 2.5% in June, pointing toward the need to "recalibrate the monetary impulse" to close the activity gap and boost inflation. However, that unanimity was lost in July's meeting when the bank decided to leave the rate unchanged.
At the most recent meeting, board member Pablo García voted to lower the rate by 25 basis points to 2.25%, arguing that communicational or tactical considerations did not warrant delaying another rate cut in the face of recent economic data.
In García's opinion, macroeconomic fundamentals in Chile "suggested that the previous cut had not been enough because activity and demand indicators showed less-than-expected growth for the next few quarters," according to the minutes. García also said inflation remains low while the external scenario is gradually weakening.
The four other members of the bank's board voted to hold the rate steady, citing "a relatively limited benefit" of another rate cut given the reduction in June and "the fact that market expectations already incorporated an adjustment in September."
A slump in the mining sector and lower prices for copper, a key export for Chile, have weighed on economic growth this year. The government recently lowered its GDP growth forecast for 2019 to 3.2% from 3.5%, with Finance Minister Felipe Larraín saying growth of "3% would be a great accomplishment for our economy this year."
The central bank's next policy announcement is scheduled for Sept. 3.