Monetary Policy Report September 2022

Monetary Policy Report September 2022

High inflation is having a major impact on the incomes and expectations of different economic agents. The projections of this Report revise projected inflation upwards for the end of this year and all of 2023, estimating that by the beginning of 2024 it will be back to values closer to the target. The reduction of inflation from its current highs to 3% assumes that the economy will continue to adjust the imbalances accumulated last year, which considers a decrease in activity and demand for several quarters. The Central Bank’s goal is to achieve inflation convergence by an adjustment in economic activity that is brief, orderly and at the minimum cost possible. To this end, it is essential to prevent the inflationary process from becoming more persistent. After the decision of the September Meeting, the MPR is around the maximum level considered in the central scenario of this Report. Future movements of the policy rate will depend on the evolution of the macroeconomic scenario and its implications for the convergence of inflation to the target. The Board will be especially vigilant of the upward risks for inflation, not only because of the high level it has reached but because inflation expectations two years ahead remain above 3%.

Monetary Policy Report September 2022

What does this MP Report tell us?

Inflation has continued to rise, affecting the income of families and businesses.

Inflation has continued to rise, affecting the income of families and businesses.

For inflation to subside, it is important for the economy to continue to reverse the overspending of 2021.

For inflation to subside, it is important for the economy to continue to reverse the overspending of 2021.

The risks facing the economy are still very significant.

The risks facing the economy are still very significant.

The Central Bank of Chile is taking every measure necessary to bring down inflation.

The Central Bank of Chile is taking every measure necessary to bring down inflation.

Inflation has continued to rise, affecting the income of families and businesses.

  • Inflation has reached decades-long records due to the significant increase in spending during 2021, world price hikes, and problems in global supply chains.
  • Another major factor has been the higher dollar price, which has gained importance in the last few months.
  • Rising prices have put a substantial burden on households’ purchasing capacity, as they have outpaced the increases in wages.
  • They also affect businesses, which find it harder to cope with cost increases.
  • Our forecasts assume that inflation will begin to decline over the coming months, to approach the Central Bank target in 2023.

For inflation to subside, it is important for the economy to continue to reverse the overspending of 2021.

  • Incoming data confirm consumption moderating from its high levels of 2021.
  • This will result in negative growth rates for some quarters, which is necessary for the country to resume growing at a pace sustainable over time and undo the economic imbalances generated during the pandemic.
  • If the economy fails to adjust, inflation will remain high for a long time, increasing the costs that every Chilean is now dealing with.

The risks facing the economy are still very significant.

  • The Central Bank is working to ensure a brief, orderly adjustment process for the economy at the lowest cost possible.
  • Major challenges lie ahead. Around the world, countries must adjust their economies to reduce inflation, which comes with consequences especially for small countries like Chile.
  • The Russian-Ukraine conflict has become more protracted, generating uncertainty about commodity prices like foods and energy.
  • Locally, the economy has been subject to high, long-lasting uncertainty and we all have to make efforts to lower it down.

The Central Bank of Chile is taking every measure necessary to bring down inflation.

  • Both individuals and businesses are paying a high price for inflation.
  • If the situation continues, its costs will soar, affecting job-creation capacity, wages, and the well-being of the population.
  • The Central Bank has raised the monetary policy interest rate to ensure that high inflation phenomenon is transitory and returns to the 3% target over a two-year horizon.
  • The Central Bank will take every measure necessary to mitigate the impact of inflation on families and businesses, and thus bring the economy back to a path of sustainable growth.
Presentations
Presentación Informe de Política Monetaria septiembre 2022
Conferencia de prensa ipom septiembre 2022
Press Release
 
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