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Chilean central bank chief ties rate plans to trade dispute


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Chilean central bank chief ties rate plans to trade dispute

Chile's central bank is ready to raise interest rates but is concerned that the U.S.-China trade dispute and the risk of a sustained fall in copper prices could make such tightening more difficult.

Officials of the world's leading copper exporter, where interest rates stand at 2.5%, expect the country's economic growth rate and inflation to rise after a 13% currency decline in 2018, Reuters reported.

"We don't want to get behind the curve in relation to inflation," central bank Governor Mario Marcel told the news agency, adding that the move could begin in the next few months. "The sooner we start [raising rates,] the more gradual it can be," he said.

But Marcel added that a continued decline of copper prices or economic deterioration within Chile's biggest export partners would put downward pressure on inflation. Copper prices have fallen 20% this year, Reuters noted.

The steep decline in the Chilean peso against the U.S. dollar since the start of 2018 has served as a buffer for the economy, Marcel noted.

"We have been managing a flexible FX rate for 18 years now, and we have been avoiding intervening," he reportedly said. "The exchange rate is our shock absorber."

Marcel also said he does not expect significant effects on Chile from the latest currency crisis in Argentina, stressing that less than 2% of Chile's trade is with its South American neighbor.