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Chile central bank considered cutting rate below 2%, minutes show

Members of Banco Central de Chile's monetary policy board considered reducing the monetary policy rate by as much as 75 basis points, a decision that would have brought the rate down below 2%.

According to the minutes of the board's Sept. 3 monetary policy meeting, all members agreed that a cut in the interest rate of between 50 and 75 basis points would be seen as necessary.

However, the board members noted that bringing the rate below 2% could lead to "polar interpretations: either it could convey an unrealistic degree of certainty in [our] projections and decisions, or it could increase uncertainty by fueling interpretations that the Chilean economy was more vulnerable than it actually was."

A more conservative reduction, either by 25 or 50 basis points, could also make room for new cuts in the future, the board said. Still, a 25-basis-point cut would reflect "an excessively prudent or passive central bank" especially given a fast-changing economic environment, the board noted.

The board ultimately decided to lower the rate by 50 basis points to 2%, citing a weaker economic outlook due to external trade tensions, as well as risks to the timely convergence of inflation to the central bank's 3% target.