Fabian Cambero and Anthony Esposito

SANTIAGO (Reuters – Chile’s central bank has increased the interest rate to 5.5% by a greater than anticipated 150 basis points. It is doing so to curb stubbornly high inflation.

A post-meeting statement revealed that the board of directors at the central bank voted unanimously in support.

According to the central bank, “The development of inflation faces significant risks” and that their eventual materialization is especially important in a situation where the CPI’s outlook and annual change are both high.

Chile’s consumer prices rose by 7.2% between 2021 and 2021. This is far higher than the central bank’s goal range of 2% – 4%.

This move was in line with the rate hike of 4.0% to 5.25% that occurred in December. The increase came as Andean countries recover from the coronavirus epidemic and government struggles to cope with rising prices.

In order to control inflation in the region, central banks have been increasing rates. Brazil’s central banks raised interest rates 150 basis points in December, and signaled a second such increase in February.

At its December meeting, Mexico’s central banking increased its efforts to curb inflation. It raised its benchmark rate 50 basis points to 5.5%.

(Graphic: Chile rate shock, https://graphics.reuters.com/CHILE-RATES/dwvkraelmpm/chart.png)