(Bloomberg) -- Chile traders raised their interest rate forecast for December after the central bank delivered its second-straight borrowing cost reduction and warned of a volatile exchange rate.
Policymakers will lower borrowing costs to 8% by the end of the year from the current level of 9.5%, above the prior estimate of 7.75%, according to a survey published by the central bank on Tuesday. Rates will fall to 5.25% in 12 months, compared with the previous forecast of 5%.
Central bankers led by Rosanna Costa are relaxing monetary policy as activity weakens and annual inflation slows toward the 3% target. Still, in the minutes to their last meeting, board members warned of short-term volatility in the exchange rate. A weaker currency fans cost-of-living pressures by making imports more expensive, and the peso hit a year-to-date low on Monday.
Read more: Chile Central Bank Sees Rates Trending Down, Warns of Volatility
Traders in the survey see Chile’s annual inflation at 3.3% in 12 months and at 3% in two year’s time.
In a Sept. 13 interview, Chile Finance Minister Mario Marcel said the economy is stabilizing after shocks, and annual inflation will end the year at about 4%.
The monetary authority surprised investors with a bigger-than-expected rate cut of a full percentage point in July before delivering a reduction of 75 basis points this month. Elsewhere in Latin America, Brazil, Uruguay, Paraguay and Peru are also relaxing monetary policy.
©2023 Bloomberg L.P.
BNN Bloomberg Picks
Bank of Canada rate pause: What mortgage holders should know
READ: The Bank of Canada's statement on its latest rate decision
UPDATED: A timeline of Bank of Canada rate hikes
Next six months 'will be quite a challenge': Desjardins CEO
Where could gold prices go in 2024?
Approach art investing as you would stocks and bonds: expert