Chile’s central bank will cut its benchmark rates to stimulate the languid economy, potentially lifting the country-related exchange traded fund from its stupor.
The iShares MSCI Chile Capped ETF (NYSEArca: ECH) has dipped 0.9% year-to-date.
Chile’s central bank cut the benchmark interest rate by a quarter point to 3.75% Tuesday, reports Javiera Quiroga for Bloomberg.
Policy makers eased their monetary stance after economic growth missed economists’ expectations and smaller-than-expected rise in prices over June, with inflation slowing for the first time in eight months, also allowed more room for a rate reduction.
“Slow growth and more controlled inflation pushed the bank to cut,” Felipe Alarcon, chief economist at EuroAmerica, said in the article. “They put a greater weighting on the economic deceleration than on inflation.”
The annual inflation rate slowed to 4.3% in June year-over-year, compared to average forecasts of a 4.5% inflation rate and 4.7% in May. The central bank has an inflation target of 2% to 4%.
The Chilean government downwardly advised its growth projection for 2014 to 3.2%, compared to a 4.9% estimate in the budget plan earlier this year. The economy grew 2.3% in May year-over-year, compared to the 2.9% median estimates.