Monetary Policy Group recommends raising interest rate to 7.75% and ending exchange rate intervention

SANTIAGO.- The Monetary Policy Group (MPG) recommended this morning that the Central Bank raise the key interest rate by 50 points –pushing it from 7.25% to 7.75%-- and also suggested that the financial entity cease to intervene in the foreign exchange market as has been the policy since April of this year.

The group, which is made up of Ángel Cabrera (Forecast), Rodrigo Cerda (UC), Juan Eduardo (UC), Tomás Flores (Instituto Libertad y Desarrollo) and Franco Parisi (U. of Chile), unanimously agreed on the rate increase, claiming that the “general forecast for inflation seems to be getting worse for July”.

The experts also proposed that the exchange rate intervention could be “a source of possible future inflation”, due to the depreciation of the peso.

Along with their recommendations for the monetary policy meeting that will be held on Thursday of this week, the economists have also indicated that new interest rate hikes will be necessary in the future if current inflationary conditions persist.