Chile hikes interest rates sharply as inflation escalates

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Band Fabian Cambero

SANTIAGO, October 13 (Reuters)Chile’s central bank sharply raised the country’s benchmark interest rate to 2.75% on Wednesday from 1.5% previously, as the Andean country’s economy rebounds strongly after the coronavirus pandemic and the government is struggling with high inflation.

This decision, well above the forecasts of traders and analysts, follows an increase at the end of August by the bank. Regional neighbors, including Peru and Brazil, have also raised their benchmarks this year to help curb price increases.

The bank said the board unanimously approved the rate hike, which was well above expectations of a new 2.25% rate from traders and analysts.

Chile’s central bank has gradually tightened the purse strings since July, when it raised the policy rate by 25 basis points after holding it for more than a year at the technical minimum level of 0.5%.

“Developments in the macroeconomic scenario have increased the risks of inflation converging towards the 3% target on the political horizon,” the central bank said in a statement.

(Reporting by Fabian Cambero; Writing by Hugh Bronstein; Editing by Rosalba O’Brien)

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