Chilean Peso down on rate cut

07-10-2009 12:13

The Chilean central bank reduced its benchmark lending rate to the lowest level in its history, while they also announced that this level will be maintained during half a year in order to boost economic growth. The Chilean Peso fell 1.1% to a three-week low, reaching a level of 552.65 per US Dollar.

Overvalued future path

Traders overvalued the future direction of interest rates in the period May – June, according to Chile’s central bank. It now provides banks the opportunity for six-month loans with a rate of 0.5% and reduced sales of its proper debt in order to decrease profits. “Expanding monetary stimulus is essential”, the central bank stated yesterday. “The minimum level of the benchmark lending rate will remain unchanged during six months.”