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Chile's central bank drops benchmark rate to 3.25%

Chile's central bank on Jan. 19 lowered its benchmark interest rate by 25 basis points to 3.25% and signaled that it could take further action.

In lowering the benchmark rate, Banco Central de Chile's board noted that internationally, financial conditions have improved while emerging economies' asset prices have increased. Broadly, it noted that activity indicators have confirmed improvements in the developed world and a weakening in Latin America.

It also noted that, domestically, Chile's monthly consumer price index came in lower than expected, resulting in an annual inflation rate of 2.7%. Inflation expectations for the central bank's time horizon are near its 3% target, it noted, though added that inflation will come in toward the bottom of its tolerance range in the coming months.

Looking ahead, the central bank said that "if the recent trends in the economic scenario persist, and so do their implications for the medium-term inflation outlook persist, it will be necessary to boost the monetary impulse."