Exclusive-Chile central bank sees peso tumble to only have short-term impact on prices-Costa

investing.com:

By Jorgelina do Rosario and Alexander Villegas

MARRAKECH/SANTIAGO (Reuters) — Chile's central bank expects that a recent peso depreciation will only have a short-term effect on prices, the bank's governor Rosanna Costa said on Tuesday, adding that the 3% inflation target for the second half of 2024 remains unchanged.

«We see a short-term impact (on prices) that, with high probability, will be diluted in the medium term,» Costa told Reuters on the sidelines the International Monetary Fund and World Bank meetings in Marrakech in her first interview to international press since Chile's peso reached its lowest point since last November.

«We don't have to get tangled up just in the short term,» Costa added, referring to the bank's two-year goal on inflation.

Chile's peso has tumbled nearly 15% since July. The peso saw its biggest daily decline in nearly four months on Oct. 2 after the IMACEC economic activity index, a proxy for gross domestic product, slipped by 0.9% in August on an annual basis as the Andean country's economy stumbles following a rapid post-pandemic recovery.

Consumer prices in Chile rose more than expected in September but 12-month inflation in the world's largest copper producer slowed to 5.1% from a peak of 14.1% last August, hitting its lowest in more than two years and further supporting the central bank's ongoing monetary easing cycle.

The authority has decided to lower borrowing costs by a total 175 basis points in its latest two meetings, bringing its benchmark rate down to 9.5%.

More cuts are expected in the coming months, though Costa didn't provide any details on future decisions.

Costa said the bank has already incorporated high interest rates from the U.S. Fed and other central banks from