Generates Risks

Aid or generates risks the new cut of rates in Chile? Buenos Aires, Argentina 16 of February of 2009 The past Thursday, the Central bank of Chile surprised the market with an unpublished cut of rates of 250 basic points. With this decision, the Rate of Poltica Monetaria took (TPM), from 7.25% at its new level in 4,75%. The present level of the interest rate of reference was not observed for three years and until recently time he was unimaginable reaches that it considering the pressures inflationary that affected the economy (mainly of external origin). According to it explained the Central bank of Chile in the official notice of announcement of his decision: This decision is based in the prospect of a significant fall of the inflation and advances to the convergence of the rate of policy to a coherent level with the present macroeconomic surroundings and its risks . The weak growth of the economic activity in the month of December of 2008 (of only 0.5%), along with the strong deceleration observed in the retail rate of inflation that in the month of January registered an historical fall of 0.8%, they were two of the main reasons considered by the monetary authority to identify the abrupt change produced in the economic context and that determined the necessity of a rapid action and forceful. From the market one of the readings that has become on the matter it aims at the deflation fears that exist between the authorities of the Central bank before the strong economic contraction. In relation to this, David Duarte, analyst of the company 4CAST thought: Really, this aims at which I create is a great fear to a deflation and a recession and the necessity to coordinate this with fiscal stimulus more soon possible. .