By Robert Kozak
LIMA, Peru--Central banks in Chile and Peru are signaling that
monetary easing may have come to an end.
The central banks have cut monetary policy rates to boost growth
hurt by falling investments in their important mining sectors and
lower commodity prices.
But inflation has also increased as local currencies
depreciated, making imports more expensive.
Both central banks have tight inflation targets, limiting how
much they can stimulate the economy.
Chile's economic growth should pick up gradually during this
year, while the central bank's easing bias is coming to an end,
central bank President Rodrigo Vergara told the Chilean-American
Chamber of Commerce on Friday.
He added that the central bank's monetary policy rate could
start to increase near the end of this year or at the start of
2016.
"Economic activity is growing at rates below 3% annually, but
according to our baseline scenario this should gradually increase
during the year, " Mr. Vergara said. A survey of economic analysts
released Friday by the central bank sees growth of 2.8% this year,
following an expansion of 1.9% last year.
Mr. Vergara said that with the economy rebounding "there is no
need to expand monetary stimulus and that in the most likely case
later this year or early next monetary policy should begin to
return to neutral."
Chile's central bank has cut 200 basis points since October
2013, leaving the policy rate at 3%.
However, Chile's consumer-price index rose an annualized 4.2%
through March, while the central bank aims to keep inflation at
around 3% most of the time, within a range of plus or minus one
percentage point.
In Peru the central bank left its reference interest rate
unchanged at 3.25% late Thursday, but signaled in a statement that
the window for more cuts is closing, banks said.
Credit Suisse said Friday that the central bank removed a
sentence allowing for more easing depending on inflation, and
replaced it with one leaving all options open.
"We think this change removes the clear easing bias that the
bank presented in previous months, and represents a risk to our
call that the bank will lower the policy rate to 3.0% in the near
term," Credit Suisse said.
Goldman Sachs said the central bank might hold its reference
interest rate steady "for an extended period of time."
However, BBVA Research said the central bank could cut the
policy rate in May.
Write to Robert Kozak at robert.kozak@wsj.com
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