Ángel Cabrera: Central Bank has taken too high a risk

SANTIAGO.-  Economist Ángel Cabrera has deemed the Central Bank’s policy to combat Chile’s rising inflation rate as risky and questionable. 

Cabrera expressed that, currently, the “inflationary situation is very complicated”, and it is still not clearly reflected in the differential margin between BCU and BCP bonds. In Cabrera’s opinion, this indicates that the market still “believes” the Central Bank.  Nevertheless, the situation could backfire over the next few months if inflation continues to rise.

The Forecast economist explained that the decision not to raise the interest rate and, at the same time, to intervene in the exchange rate market is “purely a bet”, suggesting that if the bet does not pay off, the Central Bank will lose the market’s trust. 

According to Cabrera, if that happens, the Central Bank will have to take on very aggressive measures such as significantly raising the interest rate.